Preamble

The House met at half-past Two o'clock

Oral Answers to Questions — PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — DEFENCE

The Secretary of State was asked—

Eurofighter Typhoon

Mr. Nick St. Aubyn: If he will make a statement about the development of the Eurofighter Typhoon. [61338]

The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): The development of Eurofighter in conjunction with our partners from Germany, Italy and Spain is continuing to meet the planned delivery of the first production aircraft to the Royal Air Force in mid-2002. Seven development aircraft are flying and have completed more than 620 sorties. A number of notable milestones have been achieved, including supersonic flight, care-free handling, air-to-air refuelling and missile firings.

Mr. St. Aubyn: Given the changes in policy and personality since the last election, what guarantee can the Minister give the House that the export prospects of the Eurofighter have been unharmed and undiminished as a result of the actions of his Government and some of his colleagues?

Mr. Spellar: What an extraordinary question, not least because it was this Government who took the most

important step to ensure that Eurofighter was a viable project—getting the agreement signed and by negotiating and discussing that with the previous German Government. We are involved in discussions—at ministerial level and at the level of officials and defence export sales organisations—with a number of other countries for the future prospects of this extremely good aircraft.

Mr. Menzies Campbell: Is not the importance of Eurofighter not simply that it gives the Royal Air Force an outstanding aircraft, but that it illustrates eloquently the advantages of European co-operation in defence procurement? In view of the success of co-operation in defence procurement, is it not now logical to consider co-operation across defence as a whole? May we hear from the Minister a little more about the Government's proposals for greater co-operation in European defence?

Mr. Spellar: The hon. and learned Gentleman will have noted that there have been discussions and an initiative by the Government to try to ensure that Europe plays a greater role in NATO's defence. We must ensure that we are getting a better return across Europe for the expenditure that is made, by ensuring a greater degree of interoperability and the ability of NATO European forces to act in operations in which the United States is not involved.
Those discussions are taking place, and we welcome the hon. and learned Gentleman's support for them. They run in parallel with a greater degree of involvement in the harmonisation of defence procurement through OCCAR and also with initiatives such as those taken by the leaders of the main industrial countries in order to rationalise the European defence industry so that it can compete more effectively with the United States and co-operate more effectively with the new US defence giants.

Mr. Keith Simpson: The House will be pleased to hear from the Minister how well the Eurofighter Typhoon programme is coming on—the


initial hard work having been done, of course, by the previous Government. I am sure that hon. Members will want to know, as will our friends in British industry, whether the Eurofighter will be delivered on time, given the shortfall and overspend in the air equipment budget for the long-term costing in excess of £1 billion. Can the Minister confirm that there is such a shortfall? What impact is it likely to have on the delivery of the Eurofighter?

Mr. Spellar: The hon. Gentleman says that the previous Government put in hard work; they certainly made heavy weather of it, given the time that they took to get to the position that they reached. It was this Government who ordered Eurofighter. It is on schedule to be delivered in mid-2002. We do not anticipate any slippage in that programme.

Territorial Army

Mr. Tony McWalter: What plans he has to ensure that cadet-only units of the TA have access to senior and trained personnel from the regular forces and from other TA units; and if he will make a statement. [61339]

The Minister for the Armed Forces (Mr. Doug Henderson): All cadet units will continue to be affiliated to either a Regular or a TA unit, which will provide the cadets with both equipment and access to senior and trained personnel.

Mr. McWalter: My hon. Friend is aware that in my constituency the TA has been reduced to a cadet-only force. I am concerned about the consequences of that diminution in status for access to trained personnel, especially as it seems that the 29 officers in my local TA are being pensioned off. Will my hon. Friend confirm that it is possible that cadet-only units will be upgraded to full TA units, especially in cases where the nearest units have been closed down?

Mr. Henderson: I can assure my hon. Friend that every facility for personnel and equipment support that his unit used to have will continue to be provided at that location using officers and equipment from other locations.
On the future of cadet-only units, the Secretary of State announced to the House the future plans for the Territorial Army for the period ahead of us. These matters are subject to review over the long term. I have no doubt that any future Government will want to return to the issue of TA locations, as all such matters will be subject to review.

Miss Anne McIntosh: As a result of the changes announced by the Government, the nearest TA unit to the Vale of York will be in Scarborough, which will pose enormous problems of access to trained personnel and to training in general. The settlement announced last week for North Yorkshire does not allow enough money for the police force to police the millennium celebrations effectively within the present budget. If it is envisaged that it will have to have recourse to the TA—as has been considered north of the border—what provisions will be made for the TA to be given special training for this capability before the millennium?

Mr. Henderson: The hon. Lady will be aware that those who wish to serve in the TA—we want them to

serve—will be able to do so at a number of other locations. The police will have responsibility for policing at the time of the millennium celebrations. Any requirement for reinforcements would be considered in the usual way, but that is a prime function of our Regular Army. I emphasise that the main responsibility for policing the millennium celebrations will lie with the police, and they should be able to carry it out.

Mr. Lindsay Hoyle: Will the Minister confirm whether the cadet force at Chorley has a future under the review? Has he reconsidered the nonsensical removal to north Wales of the 101 Battalion headquarters?

Mr. Henderson: I have discussed this matter with my hon. Friend on several occasions, and my hon. Friend the Under-Secretary responded to an Adjournment debate on it last week. I assure the House that, when there is a change in the location of a cadet force, we will guarantee that at least an equivalent level of service support, equipment and buildings are made available. Land Command will discuss with the Territorial, Auxiliary and Volunteer Reserve Association how that can best be achieved in Chorley.

Mr. Mike Hancock: I am grateful for the Minister's comments about protection for the cadet force. Will he carefully consider the cadet force currently located at the Connaught drill hall in Portsmouth, which is due to be disposed of by the Ministry of Defence? Will he also reconsider the relocation of the TA units that are staying in the Portsmouth area from the Perone road depot to the Connaught drill hall? That would kill two birds with one stone. It would keep the cadets where they are currently located, and it would keep this much-cherished building in public ownership. It would also allow the MOD to dispose of two buildings that would be easier to dispose of than the Connaught drill hall.

Mr. Henderson: As the hon. Gentleman will know, I shall be visiting Portsmouth tomorrow. I shall be happy to receive representations from him or his colleagues at an appropriate point in my itinerary. The decision on future locations of TA facilities within Portsmouth will be made by Land Command in consultation with TAVRA and others.

United Nations Peace Support Operations

Sir Sydney Chapman: If the memorandum of understanding relating to the United Kingdom's contribution to the United Nations peace support operations, due to be signed in March, will be available for parliamentary scrutiny beforehand. [61341]

The Secretary of State for Defence (Mr. George Robertson): Our intention to update our existing declaration of forces potentially available to the United Nations for peace support operations, and to incorporate that in a memorandum of understanding, was announced in the strategic defence review. The outcome of the review was fully debated in Parliament. Decisions about whether to commit our forces to particular UN operations will continue to be taken by the Government and will be reported to the House.

Sir Sydney Chapman: I am grateful to the Secretary of State for that answer. Given the importance of the


memorandum of understanding and the assurance that Parliament should know in which general circumstances troops should be committed, will he consider either referring this issue to the Defence Committee or having a word with the Leader of the House about another parliamentary debate? I congratulate him on his contribution to the Western European Union Parliamentary Assembly in Paris last week. As some peace support operations are taking place and will continue to take place in Europe, will he take this opportunity to underline the importance and the continuing contribution made by the WEU and its Assembly?

Mr. Robertson: I thank the hon. Gentleman for his kind remarks about my contribution to last week's meeting of the WEU Parliamentary Assembly, which was made in difficult physical circumstances.
Decisions about what troops we deploy to the United Nations will continue to be made by Ministers. We will make those decisions on a case-by-case basis, using certain criteria. Let me tell the hon. Gentleman—well in advance of any memorandum of understanding—that the criteria will include effective ceasefire and the consent of the parties to the on-going political process, exit provision, a clear mandate and possible impacts on any other commitments. That approach will enable us to tailor our force contribution to the circumstances of a particular operation, and to draw on a broad range of capabilities.

Mr. Martin Bell: Has the Secretary of State considered the merits of a truly committed, dedicated, international UN force whose orders, received from the Security Council, could not then be countermanded or obstructed by the Governments of troop-contributing nations?

Mr. Robertson: At the end of the day, it will be for the Governments of the countries that contribute to any UN force to make decisions about the fate of the forces concerned. The intention is, however, to try to create circumstances in which the UN would have on call forces from a number of different countries to deal with events that might arise. Command and control is clearly one of the more difficult and tricky aspects, and would have to be considered in advance; but I am confident that we would contribute British troops only where clear areas of command existed, allowing us both to be in charge of the troops and their safety and to contribute to the military effectiveness of any such force.

Recruitment (Ethnic Minorities)

Mr. Fabian Hamilton: What targets his Department has set for increasing recruitment among Britain's ethnic minorities. [61342]

The Minister for the Armed Forces (Mr. Doug Henderson): Recruiting goals for this financial year are for 2 per cent. of all new recruits for each service to be from the ethnic communities. Those goals will rise annually by one percentage point until reaching 5 per cent. by financial year 2001–02.

Mr. Hamilton: I thank my hon. Friend for his response. I realise that these are—rightly—demanding targets, but can he tell me what progress is being made towards their achievement?

Mr. Henderson: I am grateful to my hon. Friend for raising this important question. I can tell him that a comprehensive recruitment strategy is in place, involving the targeting of communities in which there are greater possibilities of increasing the number of black, Asian and other ethnic recruits. I am pleased to say that that strategy is already showing results. During 1997–98, there was an increase from below 1 per cent. to 1.3 per cent., and between April and September this year the figure increased to 1.8 per cent.

Mr. Edward Garnier: How does the Minister intend to retain those recruits once they are in the forces?

Mr. Henderson: I thank the hon. and learned Gentleman for his helpful contribution. We must try to retain black, Asian and other ethnic recruits in the same way as we retain other recruits: through valuing their contribution to the defence of the nation, looking after them well and trying to improve the conditions in which they operate. The same applies to black, Asian and other ethnic recruits as applies to everyone else.
We must also ensure the provision of an environment that is free of harassment and discrimination. That will be crucial not only to retaining the confidence of those who are already in the services, but to attracting others from those communities to them.

Military Training (National Parks)

Mr. Anthony Steen: If he will discuss with his EU counterparts military training in national parks and other environmentally protected areas. [61343]

The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): We have no immediate plans to discuss military training in national parks and other environmentally protected areas with EU counterparts, but environmental considerations are always taken into account in planning training.

Mr. Steen: Why is it that no other European country ruins its areas of outstanding natural beauty by allowing live firing by the military? Is the Minister aware that, on Dartmoor, we allow live firing on three ranges, which, in effect, closes the northern, most beautiful and highest part of the national park for 10 months of the year, Monday to Friday? Does he agree that it would make better sense to concentrate the Army's firepower at Willsworthy, where millions of pounds-worth of Government money have already been spent, and which is only spasmodically used, rather than allow live firing across the three ranges? The activities could be concentrated in one spot so as to allow the public to enjoy the national park for the purposes for which it was set up.

Mr. Spellar: I fear that the hon. Gentleman is confusing two issues. Areas of outstanding natural beauty that are within our areas of military training are retained better than those where there is widespread public


access—indeed, in many areas with sites of special scientific interest, we work extremely well with conservation bodies and we have commendations from them. We have to get that balance right and we attempt to achieve that. The hon. Gentleman should try to separate the two issues. We look at what we can do to improve access, but, in terms of the conservation and preservation of some outstanding areas and many areas of biological diversity, we have a good record, of which we should be proud.

Mr. Robert Key: As changes announced in the strategic defence review have materially affected the case put to the inspector at the public inquiry into the Otterburn range improvements in Northumberland national park, when will the Government decide whether to reopen that inquiry? If they do, will the Minister give a categorical assurance that the Army's military training programme will be unimpeded?

Mr. Spellar: I do not accept that the SDR changes the Army's case. Indeed, there is a strong case for the AS90. That is the one that we presented to the inquiry. The inspector in charge of the inquiry is considering whether those other matters should be taken into account, but our basic case for extending use of the AS90 at Otterburn stands and is sustainable within its own terms. We hope that the case that we have made will carry the day and enable that important training to take place there.

Dry Dock Facilities (South America)

Mr. Tim Loughton: What discussions he has had with the Chilean Government about the future availability of dry dock facilities to Royal Navy vessels in south America. [61344]

The Parliamentary Under-Secretary of State for Defence (Mr. John Spellar): My colleagues and I have had no discussions with the Chilean Government about the future availability of dry-dock facilities to Royal Navy vessels in south America.

Mr. Loughton: That was short and sweet, but is the Minister not aware that, in 1994, HMS Brazen ran aground in the south Atlantic, was rescued by the Chilean navy stationed at Punta Arenas and was afforded repair facilities in a Chilean dock? How confident is he that similar help will be on offer from Chile to the many royal naval and merchant navy vessels that serve in the south Atlantic? Failing that, what alternative arrangements has his Department been discussing with other south American countries?

Mr. Spellar: We do not have great ranges of agreement throughout the world about dry-dock facilities. We have ad hoc arrangements, dealt with under the normal arrangements between countries and, particularly, between navies, which are obviously concerned if a vessel of another fleet is in distress. The good relations that we have with our Chilean counterparts—

Mr. Loughton: Had.

Mr. Spellar: The good defence relations that we have with our Chilean counterparts will continue. We have no evidence to the contrary.

Mr. Ian Davidson: Is the Minister aware that, after using any Chilean dry dock, the ships

involved would be required to undertake sea trials, and that sea trials are the only sort of Chilean trial that we believe would be impartially conducted?

Mr. Spellar: My hon. Friend ingeniously tries to tempt me into an area in which the Home Secretary has a quasi-judicial capacity and on which I should not be tempted further.

European Defence Review

Dr. Jenny Tonge: What plans his Department has to promote a European defence review. [61345]

Dr. Vincent Cable: If he will make a statement on his recent discussions on common European defence. [61352]

The Secretary of State for Defence (Mr. George Robertson): We have invited our partners and allies to join us in thinking afresh about how to strengthen both European defence capabilities and the European Union's common foreign and security policy. The initiative has been very positively received, and I look forward to continuing the discussions with my colleagues in the coming months. The agreement of a statement of principles at the British-French summit last week was an important step forward.

Dr. Tonge: Does the Secretary of State think that—despite the Prime Minister's speech at the North Atlantic Assembly and talks with the French a few days ago at St. Malo—there should have been some mention of the matter in the defence review, so that hon. Members could have debated the overall issue of European foreign policy and defence? Is it not time that that policy was debated in the House before it is announced to the press? Is the Secretary of State happy that the Prime Minister is talking to the French but has apparently not approached other European partners?

Mr. Robertson: That is absolutely wrong. We are talking about a call for fresh thinking and not a major revision of British defence policy. A week ago last Friday, the House had a debate on the Queen's Speech that touched on those issues. We have made it absolutely clear that we are talking about a fresh look at the way in which Europe might take quicker, better and more effective decisions on a European defence capability that will be built on several key principles: no question of a European single army; no Commission or European Parliament involvement in decision making; no transfer of decision making on military capabilities from individual Governments; and no undermining or duplication of NATO. Surely, especially after Kosovo, this is a time for Europe to recognise that perhaps we should be thinking much more clearly about how, in certain circumstances, Europe might act, should act or might have to act without the United States of America, and about building our capability so that, if we do so decide, we shall really be able to do it.

Dr. Cable: Will the Secretary of State include nuclear defence in the list of exclusions that he has just given the House? Does he agree that this might be an appropriate


time to examine seriously the possibilities for co-operation on that matter, and that, even while retaining our independent nuclear deterrent, there could be useful gains from rationalising, for example, control and refitting schedules, so that we not only maintained a constant deterrent but reduced our overall dependence on nuclear weapons?

Mr. Robertson: If the hon. Gentlemen will examine the strategic defence review and the very significant and radical suggestions on the nuclear front that it contains for implementation, he will see that, some time ago, we took on board the very ideas that he is expressing. When it makes sense for us to co-ordinate with other nuclear powers, we shall do so. How we can contribute to the general debate on arms control and disarmament is a matter of primary importance to the Government, which is why certain moves were made within the strategic defence review itself.
Beyond the nuclear forces issue is the bigger and more immediate issue of how Europe as a whole will configure its forces—perhaps in the way that we completed our strategic defence review—and face the fact that the threats of tomorrow perhaps require more modern thinking about how decisions will be taken, and more modern forces to deal with those threats.

Mr. Barry Jones: May I remind my right hon. Friend, in supporting his European approach, that there is news in today's edition of The Times that delivery of the 25 C130J Hercules aircraft that have been ordered is now two years behind schedule? Was he not therefore very wise to indicate in his strategic defence review that he had not closed the door on the heavy-lift future large aircraft project? May I tell him that, if he does go forward with the project, he will find that my 3,700 constituents at the Broughton factory will not only make the wings of a future large aircraft on time but will acknowledge him as a fine Secretary of State?

Mr. Robertson: I look forward, with ambition, to receiving such praise. I again compliment my hon. Friend on the articulate and forceful way in which he promotes the interests of his constituents and his constituency. He is right to point out the inordinate, unreasonable and, I believe, disgraceful delay in delivery of the C130Js. I have taken up the matter at the very highest reaches within that company. It is one of my inherited delayed programmes, but I intend to ensure that British taxpayers get value. Similarly, on future strategic lift, the idea—perhaps even more than the idea—of a future large aircraft produced in Europe is well among our plans.

Mr. John Maples: Can the Secretary of State confirm that the Prime Minister said in his North Atlantic Assembly speech that the European Union needs genuine military operational capability and that, on Friday, the British and French Governments signed an agreement stating that
the EU must have the capacity for autonomous action, backed by credible military forces and the means to decide to use them"?

After the Amsterdam summit last year, did the Prime Minister not describe exactly those proposals as
an ill-judged Franco-German transplant operation"?
What has happened to change his mind?

Mr. Robertson: No, the Prime Minister did not. Under the Maastricht treaty, which was signed by the previous Government, we moved towards the idea of European common defence. Under the previous Government, at the time of the Berlin summit—when Michael Portillo stood at this Dispatch Box—they set out to create a European security and defence identity inside the North Atlantic Treaty Organisation. The European Union, under the Amsterdam treaty, has access via the Western European Union to the capabilities being built up in the European security and defence identity.
I, the Prime Minister and many people in this country of common sense are saying that, if we are to have that existing framework and structure, the button pressed by the EU through the common foreign and security policy surely has to connect promptly, and with military effectiveness, with the capability inside NATO. We have no intention of replicating or duplicating NATO assets—the structures are there. At issue is how Europe should use the assets that are at present available to the maximum effect.

Mr. Maples: That was the answer to a different question, because I quoted exactly what the Prime Minister said after Amsterdam. The proposal is exactly the same as the one put forward then by the French and the Germans. I know that the Secretary of State and the Prime Minister are not consulting each other on this matter, because while the Prime Minister made that statement in an interview with The Times, the Secretary of State was telling the House in the strategic defence review debate that that development would take place entirely within NATO, and re-established and restated the Amsterdam position.
Conservative Members wholly support the maximum Anglo-French defence co-operation, but within NATO. Can the Secretary of State explain how an EU capacity for the autonomous use of military forces can possibly be both autonomous and within NATO?

Mr. Robertson: If it uses the European security and defence identity component—the forces that are designed to be in place for use by Europe and can be triggered through the EU via the WEU. We are talking about the same thing. We are not in any way undermining NATO—indeed, we are strengthening it.
Perhaps this is a fortuitous moment: instead of the hon. Gentleman getting deeper and deeper into the Europhobic swamp in which his party seems to like swimming, may I inform him and the House that, today, the British contribution to the NATO extraction force in Macedonia is beginning its deployment? It will consist of a company from the King's Own Royal Border Regiment, equipped with Warrior infantry fighting vehicles. The company will be deployed for six months, and in the initial stages will be supported by a squadron of Royal Engineers and other troops.
The extraction force will be largely European led. British, French, German and Dutch troops will operate inside the NATO command structure in precisely the way


that we would have intended. The House will join me in wishing our troops and their families well in the job that they are going to do.

Sir Geoffrey Johnson Smith: With great respect, the right hon. Gentleman has got it all wrong. He sends confusing signals. What is required is not fresh thinking, but action. We have the structures. Is he aware that the Western European Union already embraces the nations that contribute to Atlantic defence? France is not an integrated member of the command structure. The European Union contains large numbers of neutral states. Rather than confusing us with rhetoric, would it not be better to talk about the WEU as the separable but not separate arm of NATO?

Mr. Robertson: The right hon. Gentleman should listen carefully to what is said. The Western European Union can act on the suggestion of the European Union and access the European security and defence identity components of NATO. All that the British Government are saying—although our thinking is quite radical—is that we need fresh ideas on the connections between the European Union's determination of common foreign policy positions and its ability to access the existing NATO European security and defence identity resources.
By streamlining the process and concentrating on building European capabilities instead of European rhetoric, we shall strengthen NATO and Europe's ability to access military resources as effectively as possible in situations that Europe might have to face.

Mr. Crispin Blunt: A year ago, the right hon. Gentleman and the Minister for the Armed Forces, who was then a Minister at the Foreign Office, preened themselves on coming to the House having secured a protocol on NATO in the treaty of Amsterdam. Many Conservative Members, including me, congratulated them on that achievement. That protocol contains a request for the Western European Union to come up with proposals on exactly what the right hon. Gentleman is talking about. Either the Prime Minister is gulling us with a load of waffle about nothing or there is a substantive change under way to what the Government agreed less than a year ago.

Mr. Robertson: This is a real storm in a Europhobe teacup. Conservative Members must get to grips with the fact that this Government secured the first ever mention of NATO in a European treaty. We are concentrating on making that work. How can the European Union, with its reinforced common foreign and security policy, get together the capability to ensure that when Europe wants or needs to act militarily and the United States does not want to get engaged, we can do so quickly, safely and effectively? My announcement on the extraction force to be based in Skopje in Macedonia shows that it is common sense to ensure that we have the proper capabilities in Europe and streamlined structures to ensure that action follows decisions.

Territorial Army

Mr. Robert N. Wareing: What assessment he has made of the impact of his planned reductions in TA centres on recruitment into the various cadet forces; and if he will make a statement. [61347]

The Minister for the Armed Forces (Mr. Doug Henderson): So that recruitment to the cadet forces is not affected by the closure of Territorial Army centres used by cadet units, we shall ensure that suitable alternative accommodation is provided for a cadet unit before it has to vacate its present site. We plan to invest up to £12 million to ensure that those cadet units that have to move are provided with the accommodation necessary to support them.

Mr. Wareing: Does my hon. Friend agree that, when Army cadet units are located in TA centres, there is a greater enthusiasm which comes from being associated with enthusiastic territorials? The cadet unit at Aintree barracks, close to my constituency, is particularly viable and usually has about 150 members. I fear that recruitment in the area will suffer from the proposed closure of the barracks. I should like a review of the situation. Will the £12 million that my hon. Friend mentioned be sufficient?

Mr. Henderson: I am grateful to my hon. Friend. I know that it is an important issue in Liverpool. I can assure him that, if a cadet unit has to move, we will guarantee that it will get the same level of support, equipment and buildings that it has at present. Having said that, one has to recognise that there are 1,400 Army cadet units in Britain. Until the statement by my right hon. Friend the Secretary of State three weeks ago, 390 of them met at Territorial Army centres. The others met in schools, youth centres and other venues and received support from the Territorial Army and other regular Army units when necessary. Only 90 units have been affected and they have the guarantee that I have just given the House. I hope that that is acceptable to my hon. Friend.

Mr. Peter Viggers: Is it really true that the Government are contemplating a cut of one third in the permanent TA staff? Will that not be severely damaging both to the cadet interest to which the hon. Member for Liverpool, West Derby (Mr. Wareing) referred and to the mobility and flexibility of the TA—the one thing that the Government say that they are trying to promote?

Mr. Henderson: We are looking at achieving better efficiency—which is what the taxpayer wants—while providing the same level of capability in our armed forces. That means that sections of our armed forces, such as the TA, have to make changes to achieve a more effective service. Our aim is as simple as that, and it applies to the matters raised by my hon. Friend the Member for West Derby and by the hon. Gentleman. There must be efficiency gains and that will mean some changes in the numbers of permanent staff.

Gulf

Mr. Andrew Dismore: If he will make a statement on the current security situation in the Persian Gulf. [61348]

The Secretary of State for Defence (Mr. George Robertson): Saddam Hussein remains the greatest threat to security in the Gulf. We strongly support the efforts of UNSCOM and the International Atomic Energy Agency to root out and destroy his nuclear, biological and


chemical weapons capabilities and to establish effective monitoring regimes. The willingness of the United States and the United Kingdom to take military action three weeks ago was instrumental in persuading Saddam to rescind his earlier decision to cease all co-operation with UNSCOM. Our forces remain in the Gulf and we are ready to order them into action again if Saddam reneges on his promise of full co-operation.

Mr. Dismore: I congratulate my right hon. Friend on his resolve in standing up to the brutal dictatorship in Iraq, but does he agree that Iraqi non-compliance with UN inspectors has nothing whatsoever to do with Israel, as has been suggested in some parts of the Arab world and indeed some parts of the House? Is he aware that, every time Saddam defies the UN, Israel has to distribute gas masks to its citizens because of the risk of chemical weapons? Does my right hon. Friend agree that dictators such as Saddam and Milosevic in Kosovo take diplomacy seriously only when it is backed by the real threat of the use of force?

Mr. Robertson: My hon. Friend is absolutely right that the likes of Saddam seem capable of recognising the will of the international community only if it is backed up by the credible use of military force. That is why our troops remain ready and willing to act if he will not comply and co-operate with the UNSCOM inspectorate. He has been warned, and I warn him again that there will be no warning the next time if co-operation is not guaranteed. Saddam's non-compliance with the United Nations and his non-co-operation with the UNSCOM inspectors have everything to do with his ambition to dictate to his neighbours and eventually become the major force in that region. We intend to make sure that that ambition is thwarted.

Mr. John Wilkinson: Since the threat of force some three weeks ago was rescinded, has UNSCOM made real progress in securing access to the most highly classified and sensitive sites for nuclear and biological weapons and weapons of mass destruction in Iraq? Is it the right hon. Gentleman's view that the Tornado squadron in Kuwait will have to stay there over Christmas and into the new year, for ever and for aye, because, seemingly, Saddam Hussein enjoys sovereign immunity?

Mr. Robertson: Saddam's failure to produce certain key documents has not been a good start after he claimed to be willing to co-operate with the UNSCOM inspectorate. We are watching his actions day to day and will make a judgment based on his performance. The UNSCOM inspectorate is building up to full strength and will, I should think, undertake a number of key investigations in the next few weeks. The rest of the world will watch carefully to see whether Saddam is willing to comply with the undertakings that he gave three weeks ago in the face of overwhelming force; our judgment on that will be swift and will involve no warnings to him.
In the meantime, the RAF Tornados based in Ali al Salem in Kuwait, which were visited yesterday by the Chief of the Defence Staff, General Guthrie, will remain on alert, ready and willing to back up with the threat of force the international community's will. They will remain there over Christmas, which will be a sacrifice for

the service men and for their families; but the outstanding contribution of all our forces in all the different theatres of operations in which they are engaged is a matter of great pride to me and, I believe, to the country.

Mr. Dale Campbell-Savours: Have there been discussions between United Kingdom Defence Ministers and American defence officials about support for the creation in the Basra enclave, in the south of Iraq, of a liberated area that is sanctions free?

Mr. Robertson: The short answer is no. My ministerial colleagues in the Foreign Office have met members of the external opposition to Saddam Hussein's regime to make it absolutely clear to people in Iraq that there would be a better world for them if Saddam Hussein were not the dictator in Baghdad. We will continue to give that message loudly and clearly to the Iraqi people, with whom we have no quarrel. We will redouble all our efforts to ensure that they get the message that humanitarian aid from this country and the international community is available, that they are deprived of much of it by the dictator in Baghdad and that the sooner his reign of terror ends, the better it will be for all of them.

Mr. Julian Brazier: The Secretary of State has admitted that Saddam Hussein is effectively ignoring the west's wishes. How much longer will we huff and puff? Is it not time, before we say any more on the subject, for us to sit down quietly with the Americans and such other allies as we have to decide what options are really open to us?

Mr. Robertson: I did not say that Saddam was effectively ignoring the United Nations; I said that, in certain respects, the disclosure of documents was not satisfactory. The UNSCOM inspectors are back and are continuing their investigations; some documents have been handed over. The hon. Gentleman would not expect me to tell the House or the wider world what judgment we will make or the criteria on which we will judge his co-operation with the UNSCOM inspectorate, but we will judge whether he is genuinely co-operating and whether he is genuinely interested in complying with the Security Council resolutions. We will make difficult decisions based on the outcome of that consideration.

NATO

Mr. David Chaytor: If a draft text of the revised NATO strategic concept is to be submitted for discussion and agreement to Foreign Ministers at the December meeting of the North Atlantic Council. [61350]

The Secretary of State for Defence (Mr. George Robertson): I expect that NATO Foreign and Defence Ministers will discuss issues relevant to the strategic concept at the December meetings of the North Atlantic Council. Drafting of the revised strategic concept is at an early stage. An agreed text will be adopted by the Washington NATO summit in April 1999.

Mr. Chaytor: I thank my right hon. Friend for that reply. Does he envisage that any changes will be tabled to the section of the document relating to the role of nuclear forces, particularly paragraphs 55 to 57?

Mr. Robertson: The strategic concept as a whole will be a product of consensus among allies, and some people


have raised issues about nuclear forces. I cannot predict or pre-empt the outcome of any such discussion, but the United Kingdom—after a full strategic defence review that looked at all those issues—sees no need to change NATO nuclear policy as expressed in the strategic concept.

Mr. Michael Colvin: When NATO Ministers meet in Washington next year to agree NATO's new strategic concept, what chance is there of European Ministers agreeing on the same objectives? What initiatives can the Secretary of State take, in light of the fact that there is no clearly defined European security and defence identity and no common European foreign and security policy? The European countries share principles, but what initiatives can he take to ensure that European Foreign and Defence Ministers go to Washington not only with shared principles but with a shared identity, to improve the chances of getting agreement on NATO's new strategic concept?

Mr. Robertson: We approach the 50th anniversary NATO summit in Washington next year with a consensus view that will involve the Americans and the Canadians, as well as the Europeans, in any forward thinking that might take place on the alliance. The hon. Gentleman underestimates the degree of success that there has been in building a European security and defence identity. He underestimates also the importance of the new, strengthened procedures for a common foreign and security policy that exist following the Amsterdam summit, and their implications. European countries will be able to build on and use capabilities when the Americans and the Canadians do not wish to be involved.
The hon. Gentleman asked what the British will bring to the table. I would say that it is the strategic defence review, which has been widely applauded—I say with some modesty—by countries as diverse as the United States and the Russian Federation, and which has shown how a nation such as this can configure and reshape its forces away from the enemies of the past to the risks and the threats of tomorrow—something from which we hope our allies will take lessons.

Oral Answers to Questions — PUBLIC ACCOUNTS COMMISSION

The Chairman of the Public Accounts Commission was asked—

Public Buildings (PFI)

Mr. Jeremy Corbyn: What assessment he has made of the resource implications of National Audit Office auditing of the use of private finance initiatives in the construction of public buildings. [61372]

Mr. Robert Sheldon (Chairman of the Public Accounts Commission): The Commission meets regularly to assess the adequacy of the resources of the National Audit Office. In 1997–98, the National Audit Office produced four reports on private finance initiative projects, all of which were the subject of reports by the Public Accounts Committee. With the continuing and

increasing importance of PFI, the Comptroller and Auditor-General will be making further reports in future years.

Mr. Corbyn: Would my right hon. Friend be prepared to authorise a further examination of the use of PFI, and of its long-term costs, in terms of borrowing and repayment for capital building and the loss by local authorities or health authorities of control of the buildings that they own? Does he agree that there is a danger that, in pursuit of short-term objectives, we will saddle future generations with large bills for newly constructed hospitals, schools or other public buildings?

Mr. Sheldon: There is of course the question of efficiency versus the finance cost, and it should be possible for those in the private sector to meet the extra finance costs by greater efficiency. If they cannot, the justification for the process is largely gone. I understand that the Public Accounts Committee is to publish a general report on the operation of PFI, and we look forward to receiving that in due course.

Oral Answers to Questions — CHURCH COMMISSIONERS

The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—

Pensions and Stipends

Sir Sydney Chapman: If he will make a statement about the proportion and amount of the Church Commissioners' contribution to clergy and widows' pensions and stipends in the current financial year. [61373]

Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): In 1998, on current assumptions, the Church Commissioners will meet total expenditure on behalf of the Church of £160.6 million, of which £134.3 million—83.6 per cent.—will go on clergy stipends, pensions and related expenditure. This includes transitional support payments to dioceses to assist them in meeting the full costs of pension contributions for parochial clergy.

Sir Sydney Chapman: I am grateful for that reply. Does it not underline the vital importance of the Church Commissioners maximising their assets, albeit within ethical constraints, to meet such a great proportion of clergy's and widows' pensions and stipends? Does it not also put into perspective the recent request that the parishes themselves try to produce more funding, given the significantly increasing costs of running the ministry?

Mr. Bell: Our current level of parochial ministry support of £20 million has been agreed following a long process of consultation with dioceses. We have to balance our support for today's Church with the need to provide long-term sustainable support for future generations. The commissioners are very grateful to the parishes for their generous response in raising giving levels to meet an increasing proportion of ministry costs. We are confident that the parishes will continue to rise to the challenge.

Oral Answers to Questions — PUBLIC ACCOUNTS COMMISSION

The Chairman of the Public Accounts Commission was asked—

Government Information and Communication Service

Mr. Andrew Robathan: If he will take steps to ensure that the National Audit Office has sufficient resources to enable it properly to audit the Government Information and Communication Service.
[61374]

Mr. Robert Sheldon (Chairman of the Public Accounts Commission): The Commission meets regularly to assess the adequacy of the resources of the National Audit Office. The Government Information and Communication Service is a cross-Government service of about 1,000 communications specialists employed to engage in the full range of Government information activities. The activities of the service's members are audited as part of the annual financial audit of each Department undertaken by the Comptroller and Auditor-General.

Mr. Robathan: Is the right hon. Gentleman aware of the disingenuous Government campaign that is unnecessarily frightening small businesses into preparing for the euro, even though a maximum of one in 10 are likely to be affected by it? Does he agree that the campaign might be propaganda and an abuse of public money; and will he ensure that the NAO has the money to investigate it, especially in the light of the Neill report?

Mr. Sheldon: As the hon. Gentleman may know, the Cabinet Secretary, Sir Richard Wilson, considers the boundary between party political advocacy and the presentation of Government policy. It is right that he should be in that position, and I am sure that he will draw the distinguishing line between the two forms of activity.

Oral Answers to Questions — CHURCH COMMISSIONERS

The hon. Member for Middlesbrough, representing the Church Commissioners, was asked—

Assessment

Mr. Simon Hughes: What systems are in place for assessing the effectiveness of the Church Commissioners' activities. [61375]

Mr. Stuart Bell (Second Church Estates Commissioner, representing the Church Commissioners): The commissioners reviewed their systems in the light of the Lambeth report in 1993 and responded to all its recommendations, including the establishment of an audit committee. They further reviewed their systems in connection with the National Institutions Measure, which establishes the Archbishops Council for the Church of England. They also take account of evolving best practice in corporate governance.

Mr. Hughes: The commissioners' mission statement is to maximise the assets of the Church to support its ministry, especially in areas of need and opportunity. In the coming 50 years, the second half-century of the commissioners' existence, will there be a way of measuring the effectiveness of the outputs—we can already gauge how effective the inputs are—in terms of the number of people who belong to the Church of England and the number who become Christians as a result of the commissioners' efforts?

Mr. Bell: I can give one assurance: I do not think that I will be Second Church Estates Commissioner in 50 years' time. We shall do our very best to satisfy the hon. Gentleman. For the long term, we have set out policy and financial arrangements making us answerable to Parliament and to the General Synod of the Church of England. Our annual reports and accounts, together with the resolutions passed by the commissioners with reference thereto, are laid before both Houses of Parliament by the Secretary of State for the Home Department, and before the General Synod by its Secretary General.
We have actuarial accounts for only three to four years into the future, but I would hope that the contribution of the commissioners, the Archbishops Council and the whole Church movement will ensure that more Christians, rather than fewer, will be practising in this country in the next 50 years.

Oral Answers to Questions — PUBLIC ACCOUNTS COMMISSION

The Chairman of the Public Accounts Commission was asked—

National Audit Office

Mr. David Heath: What recent discussions he has had with the Chancellor of the Exchequer concerning the current scope of the responsibilities of the National Audit Office. [61376]

Mr. Robert Sheldon (Chairman of the Public Accounts Commission): I last met the Chancellor of the Exchequer on 26 March, accompanied by the Chairman of the Committee of Public Accounts. Among other matters, we discussed the current scope of the responsibilities of the Comptroller and Auditor-General.
The Chairman of the Public Accounts Committee and I pointed out to the Chancellor that accountability to Parliament could better be served by extending the access rights of the Comptroller and Auditor-General to follow public money to its final recipients. I will continue actively to pursue those matters with the Treasury in conjunction with the Chairman of the Public Accounts Committee and the Comptroller and Auditor-General.

Mr. Heath: I am most grateful to the right hon. Gentleman for his answer, which is part of a series of answers that he has given me on the issue. Does he share my exasperation that it is now 18 months into the lifetime of this Government and we still have a glaring hole in the audit arrangements for public bodies? I note that he last


met the Chancellor of the Exchequer to discuss this some nine months ago: would it not be a good idea to have a meeting every quarter day until the Chancellor realises that the hole must be filled?

Mr. Sheldon: The hon. Gentleman makes an attractive proposition that I would be happy to consider. It is

important that the House should have the ability to follow public money wherever it goes, and there is a great gap at present. Some improvement has been made and we now have the opportunity to examine how Camelot gets its money, and one or two other organisations. The hon. Gentleman is right to pursue his campaign, and I welcome it.

Post Office

The Secretary of State for Trade and Industry (Mr. Peter Mandelson): I wish to make a statement on the future of the Post Office.
It has long been recognised that the postal sector worldwide has entered a new and turbulent age. Competition for business will be fierce. With greater uncertainty will come opportunities for expansion. Change is absolutely necessary if the Post Office is not to fall behind.
Globalisation of postal services, the growth of electronic mail and the internet, changing customer demands and greater liberalisation of markets are the key drivers of change worldwide. The main uncertainty is not whether markets will become more competitive, but how far and how fast.
Other post offices are gearing up for the revolution, seeking greater commercial freedom to do so. Within Europe, for example, the Dutch and German post offices have been investing in substantial acquisitions, Sweden and Finland are free to acquire and invest in other companies, and Denmark has already entered a number of strategic alliances. France also enjoys considerable commercial freedom, and has a wide spread of joint ventures and acquisitions. In Australia, New Zealand and the Nordic countries, the post offices have become independent plcs. Germany has announced its intention to privatise, and the Netherlands and Singapore have moved to partial privatisation.
Not surprisingly, the British Post Office has been demanding changes to its own organisation for years, but without anyone in government, until now, prepared to act. In the face of market pressures from other public post offices, private postal operators outside the monopoly area, other communications media and distribution organisations, the Post Office wants to be in a position to deliver a wider range of faster, more reliable postal services, differentiated products and prices that meet individual customers' requirements.
Notwithstanding its successful attempts to adapt and its current profitability, the Post Office cannot meet these challenging times in its present condition. It must change or increasingly find its business confined to a diminishing high-volume, low-mark-up sector of the postal market, with all the consequences of falling value and shrinking profits and employment base that that would involve.
The Government are not prepared to sit back and allow that to happen. We have therefore decided to embark on the most radical set of reforms since the modem Post Office was created in 1969. In future, the Post Office will be driven by a combination of effective market disciplines and commercial freedoms, which will transform its performance and its ability to do business.
Our starting point is that the relationship between the Post Office and Government has to change. I should make it clear that we certainly do not rule out the possibility of introducing private shareholding into the Post Office—for example, through the sale of a minority stake in it—at a later stage.
However, at present wholesale privatisation would not be a realistic option. It would take a long time to introduce, cause massive uncertainty, and diminish the

chance of immediate reform now, which would be the worst outcome of all, as the management of the Post Office have made clear to me.
Instead, a radical new form of public sector enterprise, operating at arm's length from Government, needs to be created. That new framework will contain the following features. The Government's role in the Post Office will be restricted to the strategic level, both on matters of commercial direction and on setting social objectives. The Post Office board will become clearly accountable for its success or failure in running the business.
An independent regulator will be established to protect consumer interests including standards of service; to regulate prices; to ensure that the Post Office is able to meet its universal service obligation; and to ensure fair competition. Once adequate regulatory provisions are in place to oversee fair competition, the Post Office will be able to form joint ventures, enter into partnerships and make acquisitions within the United Kingdom beyond the present limit of £20 million per annum.
The regulator will have a duty to promote competition by a careful and phased liberalisation of the monopoly postal area, while maintaining the universal service obligation.
We will require the Post Office to present a rolling five-year strategic plan each year for approval by Government. That is essential to protect taxpayers' interests.
On the basis of that plan, the Government will agree a profit target for the Post Office and the equivalent of a dividend to Government, as shareholder, in line with normal commercial dividend practice. In effect, that will mean more than halving the rate at which profits are removed from the business. The external financing limit—EFL—for the Post Office for the next year, 1999–2000, will immediately be reduced to £207 million from the provisional figure of £335 million. In future years, the EFL will be on a more commercial footing. The Government will expect a dividend of 40 per cent., in contrast to the recent average of 80 per cent.
That increase in retained profits will enable the Post Office to finance an increased level of investment in the maintenance of its existing business. However, the Government recognise that larger growth investment, including acquisitions and joint ventures, may require prudent borrowing if the Post Office is to grow successfully with new products, partners and markets. The Government will approve normal Post Office requests for borrowing for investment cases that are commercially robust. Separate fast-track arrangements will be put in place for considering the largest strategic investments.
It will now be possible for the internal boundaries, for example, between the Royal Mail and Parcelforce to be rationalised, if the Post Office board so decides, while ensuring that there is not undue cross-subsidy from monopoly to non-monopoly areas. Therefore, approved and transparent accounting structures must be put in place.
The Post Office Users National Council will be given a more central role, and its powers increased. A uniform public tariff will be maintained for those activities that fall within the obligation on the Post Office to provide a universal service. However, the Post Office will be given the freedom to price flexibly for volume users, and, within the monopoly area, the regulator will restrict prices to ensure that the Post Office is not making excess monopoly


profits. That will be a real spur to efficiency, and it will ensure that the general public are paying no more than they should for normal postal deliveries.
We intend to provide statutorily for the newly appointed independent regulator to carry out those duties as part of the implementation of the European Union postal office directive next year. Therefore, I will be bringing forward measures under section 2(2) of the European Communities Act 1972 to put that framework in place.
The Government remain firmly committed to a network of post offices throughout the country. The sub-post office in particular plays a valuable role in local communities and offers real service, particularly to the less mobile. We will set a social objective for the Post Office, and for the regulator, of maintaining an effective network.
The individual business men and women who run the post-office-cum-village-shop often have to be very enterprising to keep them afloat. With the best will in the world, the Post Office cannot sustain a network if it is not used, and nor can Government. However, we intend to ensure reasonable access nationwide to those who need post office service, on an electronic basis or face to face with the sub-postmaster or mistress. As the Post Office will be at a strategic arm's length from Government, we will set criteria for public access to the services of Post Office Counters that will be policed by the regulator.
There has been a moratorium on the Crown office conversion programme. I have now agreed with the Post Office a strategy, which reflects proposals put by the Post Office to the trades unions, of retaining a core of directly owned and managed Crown offices that account for a significant value of the business done at post office counters. The strategy also recognises that some further conversions will be beneficial to customers and the business. That is a sensible way forward, and I am therefore lifting the moratorium.
If the Post Office is to operate on a commercial basis, it must be able to reward staff for their efforts, taking account of the success of their business, but cutting the cloth to fit in difficult periods. The Government therefore intend, as part of this staged process of reform, to invite the Post Office board to come forward with proposals that will, within the necessary context of public sector pay policy, allow more flexible means of reflecting performance in the various parts of the business. It is important that, where appropriate, the Post Office should be able to reward success.
Events will no doubt continue to move rapidly in this constantly changing commercial environment, and further structural changes might be required which enable the Post Office to grow and to meet customer needs and which are in the best interests of the Post Office and its staff. As I said, we do not rule out the possibility of making further changes to equip the Post Office for success, such as a minority share sale or an exchange of equity with other businesses. Those options will be kept under review. We will need legislation in due course, in any case, to reflect the long-term nature of the reform package that we are putting in place, including turning the Post Office into a plc to underline the commercialisation of the business.
The reform programme that I have outlined will provide a balanced package of freedoms and disciplines for the Post Office. I believe that it is the best possible package of reforms available to the Post Office, which to date has been left starved of resources to invest in growth and unable to step up to new market challenges in the way that other European postal services have done.
Over the past year, we have appointed a dynamic new chairman, and refreshed the board with new non-executives with wide and complementary business skills. They have a vision of a world-class British Post Office that aims to be among the most successful in the world. We must give the Post Office the opportunity to bring that about.
Considerable benefits to the consumer will be the result in terms of choice, price and quality of service. We are ushering in the start of a confident, bright new dawn for the Post Office, and are looking to its management and work force to seize the opportunities, putting right the neglect of the past. Everyone stands to be a winner from our reforms, which I will set out in more detail in a White Paper early in the new year. In the meantime, I commend them to the House.

Mr. John Redwood: I thank the Secretary of State for his statement, a statement that has as many holes in it as a Gruyere cheese. It has been so well aired that the whiff of it has been on the airwaves for a very long time. It is sad that he took so long to come to the House to tell us what we have learnt from many a leak over recent weeks.
The Secretary of State and his predecessor dithered and delayed for 18 months while the Netherlands and Singapore moved to partial privatisation and Germany decided to privatise—18 months of precious time lost to Britain by the great vacillators.

The Parliamentary Under-Secretary of State for Trade and Industry (Mrs. Barbara Roche): What did you do?

Mr. Redwood: The Minister asks what we did. The Conservative Government did not have the majority to do what we wanted and the then Labour Opposition would not have supported us. The Labour Government have the necessary majority, and furthermore the Opposition would support privatisation. If the Secretary of State has trouble with the left wing of his party, I promise him the support of Her Majesty's Opposition in doing the right thing by the postal workers of this country.
For the past 18 months, the Post Office has had to watch as its overseas rivals have bought the pick of the businesses abroad to create modern global success stories. Now that we have a policy from the Government, most of the uncertainties remain for the Post Office. Will the Secretary of State confirm that the Post Office's remaining in the private sector means that it can still be raided when the Government need more cash from an easy source? Will he tell us how many hospital waiting lists will grow longer because of his giving away £128 million for next year in this policy?
The Secretary of State says that the Post Office will have to heed Ministers in its five-year plan and its overseas acquisitions—indeed, he says that it is to be cursed with strategic commercial direction from the


Government. Will he now tell us how that can conceivably be good news for those trying to run a commercial business? At best, the Post Office will move from fighting with both hands tied behind its back by the Government, to fighting with both hands tied to the Treasury. Today's is a second-class statement that will not be delivered on time. The Treasury has inflicted a defeat on the Secretary of State, because it knows that it needs to keep its hands on the money.
In pursuit of that elusive popular election to Labour's national executive committee, the Secretary of State has swapped sides, from being in favour of privatisation to being against it. Caving in to the left on the Post Office may be only a down payment on his party ambition—[Laughter.] The Minister of State, the hon. Member for Makerfield (Mr. McCartney), laughs the laugh of victory, because he has got the better of his boss, and persuaded the right hon. Gentleman to give in, in the interests of his wider popularity within the Labour movement. However, the Secretary of State need not have worried about his unpopularity, for it runs so deep that a single half-hearted and ambiguous retreat will not put it right.
For the benefit of his hon. Friends, will the Secretary of State tell the House when he might sell shares in the Post Office? When will he finally make up his mind on that crucial matter? From his statement, may I infer that he can still privatise the whole business? He has not ruled that out, but he cannot yet bring himself to tell his colleagues that he might consider it. Conservative plans for the Post Office would protect small and rural post offices, and would let postmen become shareholders on favourable terms.

Mrs. Roche: Really?

Mr. Redwood: The hon. Lady should have read my article setting out Conservative policy on the Post Office, which was published months ago in the hope that the Government would learn something from it, and get on with the job.
Will the Secretary of State answer the following questions. First, how will major investment and borrowing limits be fixed for the new business that he is to establish? Secondly, how much freedom does he propose for the foreign ventures that are so crucial to success? In his statement, that point is as clear as mud. Thirdly, will he confirm that taxpayers will be liable for any overseas losses that may be run up by the new Post Office company? Fourthly, will he tell us how much money the taxpayer will lose as a result of the changes over a full Parliament, given that £128 million will be lost to the taxpayer next year, which is the first year of the policy?
Fifthly, will the public sector pay policy still apply to the Post Office or not? The statement is completely ambiguous: the right hon. Gentleman says that it will not, but then adds that the Post Office will have to abide by certain guidelines because the Government do not want pay to get out of control. We need to know whether the Post Office is to be free or controlled and, if controlled, how it is to be controlled. Sixthly, how many other changes to the monopoly will be needed to bring us into line with the European Union postal office directive? How will that affect jobs in the Post Office?
Now that the Secretary of State has a policy on the Post Office, it offers us the worst of all worlds. The taxpayer loses money, while the Post Office still does not know

where it stands in respect of investment for the future. That proves that Labour is bad for business. The Secretary of State does nothing while manufacturing collapses; he will not answer questions, and will not debate the issue. Now, he offers the Post Office little certainty. His attitude is as damaging as that of his Cabinet colleague who refuses to back British business abroad, while travelling at the taxpayer's expense. The tragedy is that the Secretary of State for Trade and Industry will not back British business at home, either.

Mr. Mandelson: The kindest thing that can be said about that response is that it should be stamped "return to sender" and dispatched back to Conservative party central office. It was a very lame response, and we have clearly shot many of the right hon. Gentleman's foxes in our statement. It is a bit rich to be accused of dithering and delaying by a member of a Government who spent 18 years doing nothing about the Post Office. At least we have come to a conclusion and announced it. The previous Conservative Government tried to privatise the Post Office and failed, and then ran to ground and did nothing.
It is clear that the right hon. Gentleman wrote his response before listening to my statement. The Post Office will face tough competitive pressures created by us, and will have strong commercial freedoms. It is absolutely clear from the right hon. Gentleman's remarks that, if he were at this Dispatch Box and had his way, there would be full-scale privatisation straight away. Sub-post offices would face closure and rural postal services would face the axe. There would be a queue of takers for the rich pickings available for those able to buy the most lucrative parts of the Post Office.
That is what the right hon. Gentleman's policy would mean: no half measures or careful judgment, but full throttle and full steam ahead for privatisation—with or without the support of Tory Back Benchers. Coming so soon after its die-in-the-ditch stand for hereditary peers, the right hon. Gentleman's statement shows how out of touch, divided, lacking in leadership and unfit for government today's Conservative party is.
Every one of the right hon. Gentleman's questions has an answer in my original statement. Importantly, my statement sets out what our policy means for the Post Office—hon. Members will notice that that was not at the heart of the right hon. Gentleman's concerns or remarks. There will be a new arm's-length strategic relationship between the Post Office and Her Majesty's Government. Do the Opposition support that? We do not know. Do the Opposition support retained post-tax profits at an increased commercial level? We do not know. What about greater pricing freedoms? Does the right hon. Gentleman support that measure? Does he support greater freedom to invest using retained earnings?
Do the Opposition agree with the freedom to borrow for growth investments within the agreed strategic plan? They do not have the foggiest idea. What about the freedom to structure the business as the board sees fit? I would have thought that that was the sort of market-driven corporate capitalism that the Opposition would support. However, they do not know whether to support it, because they do not know whether they are coming or going.


Our measures are good for the Post Office, for its business and for its customers. That is why they will command the overwhelming support of the British people right across the country.

Mr. Alan Johnson: I welcome the statement on behalf of not only the Post Office and its users, but the public of this country who want that business to be retained within the culture that made it successful. I remind my right hon. Friend that, when the right hon. Member for Wokingham (Mr. Redwood) had his first spell in opposition—which hon. Members will remember was when his party was in government—he was not a great supporter of the proposals of the right hon. Member for Henley (Mr. Heseltine) for the Post Office. I shall check the record, but I think that the right hon. Member for Wokingham, along with many of his colleagues, opposed privatisation.
Does my right hon. Friend recall that the previous Government ran up the white flag on Post Office privatisation four years ago? Four months later, they offered their one constructive suggestion about the future of the Post Office in response to a Trade and Industry Committee report, and said that they would reduce the external financing limit to 40 per cent. of pre-tax profits.
Does my right hon. Friend remember the statement being made from the Dispatch Box, and does he recall what happened to that pledge? Six months later, the external financing limit was hiked up to £365 million. That is why the Post Office got into further trouble, after a review that lasted four years. I congratulate my right hon. Friend once again on making the only constructive statement on the Post Office that any Minister has made from the Dispatch Box in the past six years.

Mr. Mandelson: I am grateful to my hon. Friend for his remarks. I recall what Conservative Ministers said and what they subsequently did in relation to the Post Office, which is why the British public felt so betrayed by the Conservative party in office.
My hon. Friend is right about the right hon. Member for Wokingham. I do not know whether he is coming or going in his response. I checked what the right hon. Gentleman said about the Post Office only this summer. He said:
The Government needs to think globally. The Post Office needs to form worldwide alliances, joint ventures and businesses"—
that was in my statement.
The right hon. Gentleman continued:
The Opposition would give a fair wind to proposals that free the Post Office to invest abroad—
that was in my statement—and that the Government
should start to prise open the Post Office monopoly".
Very wise words, and that is exactly what I am doing.
The right hon. Gentleman made the case for "liberalising the Post Office" and "introducing greater competition" into the Post Office. All this I propose in my statement. He asked for a policy that
allows the Post Office to expand abroad"—
I agree with that—claiming that the business was "stultified" by the Government's "lack of imagination".
What lack of imagination is there in the statement that I delivered? The right hon. Gentleman describes it as "fudge", but now that he gets the whiff of a Tory party leadership contest in the air, he is lurching further to the right in order to re-heat the old privatisation nostrums of a failed Conservative party.

Mr. David Chidgey: We broadly welcome the statement. We have long argued from these Benches for greater commercial freedom for the Post Office, and at last such a policy is being set out by the Government, which we welcome. However, there is a danger that the main issues have been fudged. I see from the statement that there is still a need for Government approval of borrowing. We will want to examine that closely in the White Paper.
We agree with the reduction of the external financing limit to £207 million, but it is a bit rich to call that commercial freedom. The Government's demand for a dividend of 40 per cent. is beyond the wildest dreams of any commercial operator of which I have ever heard. Reducing the Post Office's investment capital will make the Post Office fight for its now open market share with at least one hand tied behind its back.
When the Government open up the Post Office's monopoly to the market, what action will they take to ensure that our Post Office has access to the other national delivery service contracts in Europe and around the world? The quid pro quo is important.
The Secretary of State said that sub-post offices were vital to communities, and I agree. Can he confirm that the Benefits Agency and Post Office Counters computerised switchcard service will be put in place to provide essential income and service support for the Post Office? Is he taking action to overcome the problem of the reduced number of post offices that can issue motor tax certificates? He must be aware that only 3,000 post offices out of 19,000 are allowed to issue motor tax certificates. What action is he taking to persuade the Driver and Vehicle Licensing Agency to open up the net to more post offices?
The right hon. Gentleman must be aware of the number of branch offices being closed in small communities around the country by the major clearing banks. What action is he taking to press the clearing banks to transfer over-the-counter banking services to sub-post offices, to give them another line of business to make them more viable?

Mr. Mandelson: The Post Office is already undertaking, in co-operation with banks and building societies, a number of pilot projects of exactly the kind that the hon. Gentleman suggests. We strongly support that. It is the way forward for post offices, and they will receive every encouragement from us to continue.
I share the hon. Gentleman's concern about sub and rural post offices. It is clear that, if we were pursuing the right hon. Member for Wokingham' s policy of privatisation, we would be placing a major axe over the future of large swathes of our sub and rural post offices. If we were to embark on privatisation now, we would create enormous uncertainty. It would be enough to make many sub-postmasters and sub-postmistresses throw in the towel. They would have no idea what the future would


bring. The certainty and confidence to enable the Post Office to plan for the future are essential elements, and are characteristic of these proposals.
The hon. Gentleman referred to the Government's approval for large investment projects. It is reasonable for the Government, as shareholder, to have some residual power of approval. It will give the Post Office considerably more latitude than it has had before, or than it expected from this package of measures.
The hon. Gentleman made a good point about a quid pro quo for the Post Office to buy into or obtain equity shares in post offices in other European countries. That is important, and we must consider carefully what further structural changes should be made to enable the British Post Office to do that. Other European national post offices have made considerably more progress along those lines than we have, and I regret that. We are playing catch-up.
On the Horizon project, the Government are committed to providing a modern, secure, convenient and cost-effective means of paying benefits to customers. That is what the benefit payment card has been designed to achieve, and that remains our objective. It is true that we have been concerned about the substantial delay suffered by the project, and we are monitoring its progress. I hope that it will be able to catch up, and that it will be brought to a proper conclusion and completion in due course.

Mr. Bob Laxton: I welcome my right hon. Friend's statement. It will be particularly welcomed by the public, who have expressed their fondness for the Post Office and their keen desire for it to remain in the public sector. It will be much welcomed by sub and rural post offices, as it will give them a sense of stability, and will enable them to continue in business. It will also be welcomed by the Post Office and its work force.
I listened with interest to the entirely predictable comments of the right hon. Member for Wokingham (Mr. Redwood). I noted with rye amusement his comment that he had been unable to deliver a majority in favour of the privatisation of the Post Office. Although the Conservatives were in government, he was obviously yet again in the minority.
The limit on joint ventures is being lifted. It currently stands at £20 million. Will that limit be removed totally, so that there is no cap on it, or will it be increased? Although much has been made of the external financing limit and the arrangements by which the Treasury sucks money out of the Post Office, when the Trade and Industry Committee examined this issue, it found that there was no methodology or formula for the process. It seems that, under the last Government, if the Treasury had a shortfall, it picked a figure out of the air, and decided to rip it out of the bottom-line profits of the Post Office.
One thing that will be ensured now, irrespective of the issue—

Hon. Members: Question.

Madam Speaker: Order. The hon. Gentleman is not the only one to have offended in questioning Ministers on statements; most Back Benchers, on both sides of the House, regularly offend in this regard.
Let me tell the House, for the umpteenth time, that hon. Members should not themselves make statements; they should ask the Minister questions. So far, I have heard only one direct question to the Secretary of State. I want those who are rising now to put direct questions.
Secretary of State, will you respond to the question that has been put so far?

Mr. Mandelson: I will, Madam Speaker—although it is difficult to hold back hon. Members in their enthusiasm for the measures that I have announced.

Madam Speaker: Their enthusiasm can be expressed to the media outside the Chamber. In the Chamber, hon. Members ask questions of the Government.

Mr. Mandelson: I was going to make precisely that point, Madam Speaker. There is a waiting Press Gallery to receive hon. Members' comments outside the Chamber.
Let me answer the specific question asked by my hon. Friend the Member for Derby, North (Mr. Laxton) about the way in which the Government will approve investment projects submitted by the Post Office, although I thought that I had covered it in my statement. Let me make it clear that approval will be given for normal investment cases put up by the Post Office. My hon. Friend is right to suggest that the £20 million ceiling will be removed.
The Post Office will be obliged to demonstrate commercial robustness in the projects that it submits, and we shall expect them to be in line with the strategic plan that will already have been agreed between the Government and the Post Office board.

Mr. Richard Page: The Secretary of State does not have the excuse of a small majority for such a weak and pusillanimous statement. May I remind him that his party refused to support the then Government when they wanted to present proposals to help, privatise and liberalise the Post Office? Does he not know that the Post Office needs hundreds of millions, if not billions, of pounds of investment, and that his drip-feed of £100 million a year will not be enough? He knows about foreign competition; when will he set the Post Office free? We did it for British Telecommunications, and look at the success of what we did. Why does the right hon. Gentleman not do the same for the Post Office?

Mr. Mandelson: I fail to understand quite what the hon. Gentleman's point is. Of course we are setting the Post Office free—that is the point of my statement—but we are not simply giving it freedom to go on a spending spree, regardless of whether there is any commercial justification for the investment, strategic alliances and joint ventures that it wishes to undertake. I am surprised that the hon. Gentleman should suggest, as he seems to, that we might act in that way.
As for what the hon. Gentleman said about "drip-feeding" £100 million into the Post Office coffers, I do not recall making any such comment.

Mr. John McWilliam: I congratulate my right hon. Friend on his statement. Does he agree that this is the most fundamental change—maintaining public


ownership, while increasing flexibility and competition in public enterprise—since the late Herbert Morrison set up the public enterprise in the first place? Is it not therefore significant that it is my right hon. Friend who is making that change?
Will my right hon. Friend accept the relief of my rural constituents, who now know that universal service will still apply, and that they will still be able to receive their mail? Will he also accept the relief of employees at Blaydon district sorting office who have been campaigning with me, and trying to secure a statement so that they can start planning for the future? May I thank my right hon. Friend on their behalf?

Mr. Mandelson: I am grateful for my hon. Friend's comments. I think that people throughout the country, not just the Post Office work force—although they are important; there are many of them, whose commitment to the Post Office I acknowledge and commend—but consumers and customers, will be relieved that at long last we are providing some stability and confidence, on the basis of which the Post Office can expand properly and successfully in the future.
My hon. Friend is right to say that, at this stage of the Post Office's development, it would not have been appropriate or desirable either to go for new-fangled privatisation, or to continue with old-style nationalisation. I have every confidence that, were he alive and listening to the statement, my late grandfather, who was famous for being a great moderniser in his time, would recognise that nationalisation has to move on. It has to move on not to privatisation, but to commercialisation. That is what he would applaud, and I am pleased to have the opportunity and privilege of announcing that on behalf of the Government.

Mr. Eric Forth: Will the Secretary of State confirm that what he is really talking about is a publicly owned business with extended borrowing powers, powers to acquire other businesses and powers to engage in competitive, if not predatory, pricing? What does he have to say, therefore, to privately owned competitors of that business, which will thus be able to operate in a favourable environment, but can never go bust if it makes lousy decisions on investment and rotten decisions on predatory pricing? What does he have to say to the private sector?

Mr. Mandelson: What I say to the private sector, which I am sure will welcome this development—[HoN. MEMBERS: "No."] Well, I have not heard any comments, but no doubt some in various corners of the universe will be eked out if Conservative central office is doing its job this afternoon.
What the private sector will say is that it strongly welcomes the establishment of a tough regulator, among whose duties will be the need and obligation to ensure fair competition. That is the regulator's job. The regulator will be accountable, through me, to Parliament for that job. The right hon. Gentleman should keep his powder dry and give the new arrangements and regulator a chance

to work in the interests of the Post Office and of the country as a whole, before trying to shoot them down in flames.

Mr. David Winnick: Is it not true that the reason why privatisation was not carried out in the previous Parliament, when there was a Tory Government, is that some Tory MPs from rural areas made it clear that they would not vote for privatisation because of intense constituency pressure? Does my right hon. Friend accept that there is no public support whatever for the Post Office to be privatised, and that it is unfortunate that the Tories do not recognise that?

Mr. Mandelson: I can barely add to my hon. Friend's eloquence. He is absolutely right. To be honest, as a result of hearing what Conservative Members have said, I am none the wiser about the official policy of the Conservative party on the Post Office, but no doubt that will emerge in time as the coming leadership contest hots up.

Mr. John Greenway: In the Post Office Counters business plan, which underlies the Secretary of State's statement, how many rural sub-post offices are expected to close under the arrangement? Is it not a bit rich to keep on blaming privatisation for post office closures, when the existing arrangements are seeing more sub-post offices in rural areas closed week after week?

Mr. Mandelson: What policies does the hon. Gentleman support? I have already made it clear that the Government and the Post Office board remain committed to maintaining the nationwide network in all parts of the country. Does he support the policies of the Government or does he support the views of some, or all—who knows?—of his right hon. and hon. Friends, who want to privatise the network, which would lead to its effective and speedy collapse?
Of course, there is no arbitrary figure that either I or the Post Office board wish to pluck out of the air. What concerns people is access to services, not the number of post offices, but let me make it absolutely clear that that network is going to be maintained. It is going to be maintained in all parts of the country. As technology changes, and as people gain access to postal services without coming face to face with their postmaster or mistress, that will extend the opportunities and services to which ordinary people have access.

Mr. Jim Cousins: May I give a very hearty welcome to Postman Pete? If my right hon. Friend's grandfather had heard his statement today, I am sure that he would have repeated his remark that socialism is what a Labour Government have done.
May I urge my right hon. Friend to make his priority not the introduction of private capital into Post Office services but the creation of a partnership between the Post Office and private sector interests, so that the Post Office Counters network—our wonderful, priceless national asset that reaches every community regardless of how remote or geographically or socially excluded it may be—can be used as a platform for provision of a whole new range of financial transactions and services? Will he make that his priority?

Mr. Mandelson: I am very happy to give a ready "yes" to my hon. Friend's question. The Post Office itself wants


to undertake precisely that type of partnership and joint venture—for which now, at long last, the Post Office will receive backing from a Government who are strongly committed to its expansion and prosperity. As for the Morrisonian nature of my proposals, yes, they are principled, open-minded and undogmatic. In that respect, socialism is indeed precisely what a Labour Government are about to do.

Mr. Michael Jack: Will the Secretary of State explain, first, why there was nothing in his statement—on a business that is very much a people business—about enabling individual postmen and women to develop a financial stake in their own businesses, to become real stakeholders? Secondly—having given another £135 million a year to the Post Office—will he explain what he believes is the real investment deficit? Thirdly, will he explain whether, under the new arrangements, the revised Post Office will be able to invest in enterprises providing communication services that it currently does not provide?

Mr. Mandelson: No, I shall not give the right hon. Gentleman an estimate of the investment deficit. As a member of the previous Government, he would know more than many of his colleagues about the Post Office's investment deficit. It is not for Ministers to determine the Post Office's investment needs; that is for the Post Office board. I do not think that the right hon. Gentleman understands the nature of the new relationship and new approach that the Government are taking to the Post Office. Perhaps, in the quiet of his room, he would like to re-read my statement, as he would then understand it even better.
I should be very sympathetic to any suggestions that the Post Office board would like to make on a financial stake for the Post Office work force in the Post Office's future. There are a number of very good possibilities and excellent options for ways in which we can continue Post Office restructuring and its progress, and that is certainly an option that I should like to consider very carefully indeed.

Ms Jackie Lawrence: May I congratulate the Minister on listening to both the British public and the Post Office before formulating today's statement? The British public clearly want the Post Office to remain in public ownership, and the Post Office itself wants commercial freedom to secure its future. Does he agree that evidence from a private poll conducted in July 1998 by BPRI—which shows that 60 per cent. of Conservative Members supported the idea of an independent, publicly owned corporation—demonstrates that Opposition Front Benchers are out of touch not only with the needs of the British public but with the majority of their own Back Benchers?

Mr. Mandelson: My hon. Friend is right: Conservative Front Benchers barely know what time of day it is—they are so busy fighting among themselves, like ferrets in a sack—let alone the views of their own Back Benchers. She is also right to say that it behoves politicians—members of the Government—to listen to what the public are saying, which is that they want a successful Post Office. They want it to face stronger and tougher competition, and they want that spur to efficiency and

innovation which any commercial organisation needs—they are going to get it—but they also want the Post Office to continue to make a vital contribution to the social life and cohesion of this country.
Both those things will be achieved by the measures to be introduced by the Government. I have absolutely no doubt that the public will not only be content with what we have announced, but want the Post Office to go from strength to strength, even if that means making further changes to its structure and organisation. We are at the beginning of the process, not the end.

Mr. Edward Leigh: Will the right hon. Gentleman acknowledge that two principal difficulties, which have been flagged up in previous reviews, face commercial freedom in the public sector? First, how can the Post Office be a genuinely commercial organisation when it does not have complete freedom to set its own EFL—its dividend to its only shareholder? Secondly, how can it engage in fair competition with its domestic competitors when—uniquely—it will not be allowed to go bust? Surely those are distinctive obstacles to practical commercial freedom in the public sector.

Mr. Mandelson: The hon. Gentleman might just as well say that he favours privatisation. In his view, public is bad and private is good. The sooner every public service is dragged kicking and screaming into the private sector, the better it will be for him. In my judgment—the measures that I have announced support my contention—it is possible for an organisation to enjoy considerable commercial freedom while remaining in the public sector, as the Post Office does. Other organisations—BNFL, for example—enjoy similar status. It exercises considerable commercial freedoms, but remains in the public sector.
I do not disguise from the hon. Gentleman the fact that we are trying to create a new public policy model of public enterprise through these changes. This is not old-style nationalisation or new-style privatisation, but something completely new and different. To coin a phrase, the approach belongs to the third way of political thinking in this country. [Interruption.] Not for a moment do I expect Conservative Members even to begin to understand what on earth we are talking about, because they are so locked into the past. They have not a single idea or shred of new analysis to contribute to thinking for the future, which is why they are over there and we are over here.

Mr. Tony Colman: I join my hon. Friends in strongly welcoming my right hon. Friend's statement on the commercialisation of the Post Office. The decision will be welcomed outside the House by customers, senior Post Office management and the unions. May I draw his attention to an on-going dispute at the Putney sorting office, which has continued for five years? I hope that he will join me in urging senior management and unions at the Post Office to settle those problems as soon as possible, in their new commercial freedom.

Mr. Mandelson: One thing is clear, not only in Putney, but right across the Post Office organisation and its network: the Post Office will not succeed in realising the opportunities that we are creating for it if management and work force do not work closely together, united in their commitment to making these new commercial freedoms a success for the Post Office and for consumers.
Many people will stand aside and judge how committed the work force and the management of the Post Office are, and with what skill, ingenuity and imagination they are able to bring about the full realisation of the opportunities that the Government are creating for them. In the light of that, we shall need to consider what further changes and restructuring of the Post Office may be necessary.

Mr. John Bercow: Is the Secretary of State aware that, on the strength of this morning's advance press briefing, Mr. Nick Butcher, the managing director of DHL, said that, if he were an executive in the Post Office, he would be very disappointed, because its ability to develop a strategy that would allow it to be a force in the next decade and beyond is being strangled?
Does the right hon. Gentleman not understand that, by giving way to the Communication Workers Union, to the Minister of State, the hon. Member for Makerfield (Mr. McCartney), and to the unions' sponsor and spokesman, the hon. Member for Hull, West and Hessle (Mr. Johnson), he will come to be regarded not as a mighty Minister, but as a mere dithering minnow around the Cabinet table?

Mr. Mandelson: The hon. Gentleman is on form. I heard the observations of the manager to whom the hon. Gentleman referred, but he is not a executive of the Post Office, and does not speak on its behalf. I should prefer to wait to hear what the chairman and board of the Post Office have to say. I very much hope that they will strongly welcome the measures that I have announced.

Mr. Harry Barnes: Does my right hon. Friend remember the arguments that used to go on in the Labour party about public ownership? Some wanted to move quickly towards it, while others developed the theory of the inevitability of gradualness. I hope that the Government are not developing a mirror image of that approach, bearing in mind the ideas on privatisation expressed by the Conservatives. Arguments have been made about possible shareholdings in future. I hope that the Government are not engaging in that and opening the door in the direction that the Opposition want to go. Many would support commercial freedom within public ownership, but would question moving further.

Mr. Mandelson: I hear what my hon. Friend says. Nobody is trying to move gradually. On the contrary, we are trying to give a sense of urgency to the changes that the Post Office needs to undertake if it is going to catch up and compete with the best in Europe and the world.
That is the challenge that lies before the Post Office. We shall keep its performance under review. If it rises to the challenge, seizes the opportunities that we have created and does well in the form that we are creating, it can look forward to a long and happy future in that form. However, if it does not perform or if there are additional opportunities that we believe the Post Office should take for its success and for the benefit of its customers, we

shall not hold it back. We want to move with the Post Office towards its continuing success. We shall keep under review every aspect of its operation.

Mr. Edward Garnier: The Secretary of State said that the Post Office board would be accountable. To whom, and how?

Mr. Mandelson: The Post Office board is appointed by the shareholder—the Government. It will be accountable to Parliament through the Secretary of State.

Mr. Lawrie Quinn: We have had quite a few consultations locally when post offices have been forced to close, not because they have failed to deliver, but because private sector interests have decided to walk away from their business. An important part of my role has been to engage and involve the local community in consultations about the future of their post office or sub-post office. I am glad to say that we have succeeded in reinventing local post offices. Will there be any changes to the consultation process to give local people wider involvement in building a new Post Office for the future?

Mr. Mandelson: The measures that I have announced this afternoon will lead to greater investment in and strengthening of the local post office network, resulting in improved services to ordinary people in every part of the country. I attach importance to what consumers of postal services are saying. That is why we are strengthening the Post Office Users National Council. The regulator will have a duty to make sure that consumers' views are properly tapped and taken into consideration in the future development of the Post Office.

Mr. Edward Davey: May I have the Secretary of State's assurance that the model of commercial freedom that he has announced today will be sufficiently flexible to allow local managers to pay the postmen and women working in places such as my constituency, which is a high-cost area, sufficient wages to recruit and retain them in order to reduce staff turnover and improve mail delivery performance? Will it be sufficiently flexible to allow investment in the new state-of-the-art sorting centre needed in Feltham to improve mail delivery performance in my constituency?
Will my right hon, Friend tell the House why his proposals for commercial freedom fall so far short of the models adopted in world-leading postal services such as those in New Zealand, where management can utilise up to four long-term credit lines with private banks, unguaranteed by the state? Those borrowings are free from Treasury spending controls, permission and veto.

Mr. Mandelson: On the hon. Gentleman's second point, those options and avenues need careful consideration by the Post Office board. They will certainly receive a sympathetic consideration by me, too. As I have made absolutely clear, we are at the beginning, not the end, of the process of modernisation of the Post Office. Indeed, I hope that those and a number of other options will be entertained in the White Paper that I shall publish early in the new year.
As for pay, it is not for the Secretary of State to determine the individual pay policy of the Post Office. Of course, its management has to be cognisant of the overall


context of public sector pay, but, as I said in my statement, we want to create some flexibility for performance pay to be strengthened. Whether that descends quite to the level to which the hon. Gentleman referred is a matter for the judgment and operation of the Post Office board.
I hope that, as a result of the measures that I have announced this afternoon, there will be high investment, high productivity and rising income levels for those who work in the Post Office, to the benefit of those who work in the Post Office and those who depend on its vital service.

Mr. Paul Flynn: Does my right hon. Friend agree that the same model should be applied to other state enterprises that the previous Government found impossible to privatise, and would benefit from being turned into operations that combined the strength and security of state enterprise and the freedom of the private sector? Is not one example the Patent Office in Newport, which is highly efficient, but hamstrung by Treasury rules that prevent it from entering sectors that are run by the private sector less efficiently and at greater cost to the public purse? Will my right hon. Friend confirm that his announcement today is a fine example of modern, practical, intelligent socialism?

Mr. Mandelson: I have no hesitation at all in receiving and accepting that accolade for what I have announced this afternoon. In doing so, I pay tribute to my colleagues in the Treasury, with whom I have had an interesting and useful dialogue, stretching for some considerable time and resulting in the very progressive and enlightened statement that I have been able to make this afternoon, with the full agreement of my right hon. Friend the Chancellor of the Exchequer.
We shall have to see how this new model of public enterprise works, but I am confident that it will work very well. I hope that, in the light of our experience, we shall be able to apply new principles and new practices of public enterprise across the public sector. In that context, we have made a little bit of history in what I have announced this afternoon.

Miss Anne McIntosh: The right hon. Gentleman referred to the liberalisation of postal services across the European Union. Will he say whether the problem of terminal dues has been resolved? While he is being briefed, may I also ask him to say how the measures that he has announced will enable the Post Office to compete with TNT and the Dutch post office?

Mr. Mandelson: On competition, I made it clear in my statement that I want to ensure that there is no abuse of the monopoly area of the Post Office's activities or improper cross-subsidy between monopoly and non-monopoly areas. I fully accept that those are important issues for the private sector, as is the differential application of VAT between those in the public and private sectors who are involved in the postal service. As the hon. Lady probably knows, those rules are being reviewed by the European Commission; we are actively contributing to that process and to the review of the other matter to which she rightly referred.

Mr. Dennis Skinner: Does my right hon. Friend agree that one reason why the Tories are sat over

there is that they became besotted with the idea of privatisation, as evidenced by bus, coal, rail, and finally rain? Thankfully, the British people, who are totally against the privatisation of the Post Office, woke up in time, and ensured the Tories' defeat. My right hon. Friend has today made it pretty clear that there is a powerful case against privatising the Post Office, albeit temporarily, but why can he not rule it out permanently?

Mr. Mandelson: The key issue for us was to give the Post Office more commercial freedom urgently and immediately. Quite apart from the dubious justification for privatisation of the Post Office at this stage of its development, it would have taken three or four years if we had embarked on such a course. In that time, the Post Office would have fallen further and further behind international competition, as it would not have been able to enjoy any of the commercial freedom it needs if it is to compete more effectively with the best in Europe and the world.
The commercial freedom that has been given to the Post Office will be sufficiently extensive to ensure, together with the tough competitive pressures that will operate, a considerable improvement in performance—it will vest the Post Office with the ability to succeed in the future. If the Post Office falls short of that ambition, I shall discuss with it any adjustments that have to be made, although I do not foresee that any further changes will be necessary in the immediate future. The Post Office needs a period of stability and certainty in which to build its business; that is what the measures announced this afternoon will provide.

Mr. Andrew Lansley: Does the Secretary of State recognise that the question whether the Post Office continues in the public or private sector is at the heart of the issue? As a publicly owned organisation, it will not be able to set strategy or determine investment. In so far as it is in a commercial marketplace, its competitors will regard it as having the protection of a public sector or taxpayer guarantee. Will the Secretary of State confirm that, in terms of the commercial marketplace, the Post Office will not enjoy exemption from the provisions of the Competition Act 1998, except strictly in respect of its statutory monopoly activities?

Mr. Mandelson: The newly appointed independent regulator will be extremely mindful of the competition requirements and of the law that operates in this country. That duty will be placed on him or her by the measure that we are proposing. The hon. Gentleman either has failed to notice or has overlooked the fact that I am proposing to reduce the Post Office's monopoly activities significantly, and that matter will be considered further in conjunction with the Post Office. I hope to be able to give a further indication of how far we intend to go in the White Paper next year, so, before the hon. Gentleman and others in the private sector jump to conclusions about our intentions, I ask them to wait a little longer so as to see exactly what we have in mind, which will become clear in the new year.

Mr. Jack: On a point of order, Mr. Deputy Speaker. The statement that we have just heard from the Secretary of State was clearly of such importance that he felt that


he must come to the House of Commons this afternoon to advise hon. Members about his proposals for the Post Office; yet, once again, this information was trailed extensively in the media ahead of his coming to the House. I seek your guidance as to what action can be taken to ensure that, if a matter is of such importance that it merits a statement in the House, it remains the case that the House is the first place that we hear about it.

Mr. Deputy Speaker: Madam Speaker has said what she feels about how these matters should be ordered, and it is to be hoped that those on the Government Front Bench have taken note of that. However, it is impossible to guard against pre-discussion of events that are known about, and it is therefore inevitable that people cannot behave like Trappist monks. The statement was made here in the House of Commons today.

Orders of the Day — Water Industry Bill

Order for Second Reading read.

The Minister for the Environment (Mr. Michael Meacher): I beg to move, That the Bill be now read a Second time.
Within three weeks of coming to office, my right hon. Friend the Deputy Prime Minister and I held a water summit and set out a 10-point action plan for a better water industry. Since then, we, the water companies and the Office of Water Services have made substantial progress in improvements in a number of key areas. In particular, we have tackled leakage as a priority, and we are looking for a 20 per cent. reduction in total leakage during the first two years of the Government. One of the Government's commitments at the water summit was to conduct a review of water charging. We did that, publishing a consultation document in April and our response to consultation in November, and we now want to implement our decisions in that area.
Since privatisation in 1989, water bills in England and Wales have risen by more than a third in real terms. Since 1990–91, total profits have risen from £1.3 billion to more than £2 billion in current prices. Significant improvements have been made in water quality and the water environment in that time, but there is still a considerable way to go. We want an ambitious programme of investment in the next century to protect our beaches and rivers, to make further improvements to our drinking water and to protect our precious nature conservation sites. At the same time, we want to ensure that hard-pressed customers are not faced with unreasonably high bills.
Our document, "Raising the Quality", outlined an improvement programme, costed at £8 billion to £8.5 billion, to be undertaken by 2005. At the end of October, the Director General of Water Services published his document, "Prospects for Prices", confirming that our programme could be afforded, with substantial price cuts. We believe that we have struck the right balance between protecting and improving the environment and safeguarding the interests of customers.

Mr. Eric Forth: I have no doubt that the Minister is one of those who argue that it is right to put high taxes on petrol, for example, to promote conservation and the responsible use of resources. Why, then, would he not want to encourage responsible use of the scarce resource of water and to provide a proper source of investment to improve the product in the future by levying appropriate charges?

Mr. Meacher: The right hon. Gentleman seems to have missed the point that the water summit had a 10-point plan, one point of which was about leakages and the other nine of which were about water conservation. We also issued a consultation paper on abstraction earlier this year; we have received the responses, and I hope that we will be able to make a statement soon. We want to put in place a set of incentives to ensure that there is proper conservation by all sections of the community: industry, households and the water companies themselves.
There is good news for customers on the overall level of water bills. The Bill is designed to institute a system of fair and affordable water charges, especially for vulnerable customers, so that we can safeguard public health while ensuring that water is used in a sustainable way and protecting the aquatic habitat.
The Bill has three key aims: preventing household disconnection; protecting vulnerable groups; and promoting increased customer choice. Water is a basic essential of life, needed not only for customers' personal hygiene but for the public health. It cannot be acceptable to allow families to be deprived of access to a sufficient supply of clean water for drinking, washing, cooking and sanitation.

Mr. Edward Leigh: Will the right hon. Gentleman give way?

Mr. Meacher: I will in a moment.
I recognise that, in recent years, there has been a welcome reduction in the number of customers disconnected. The trend is going in the right direction, down from just over 1,900 household disconnections in 1997–98 to about 640 in the first six months of the current financial year. The figures are encouraging, but we should not forget that any disconnection can lead to significant deprivation, social exclusion and risks to the health of the whole community, not only the families who are cut off.

Mr. James Gray: rose—

Mr. Leigh: rose—

Mr. Meacher: I give way to the hon. Gentleman who asked me first.

Mr. Leigh: I am most grateful to the right hon. Gentleman.
Obviously, disconnections are to be regretted but, as the Minster said, there were only 640 out of a nation of perhaps 30 million households. Does he at least acknowledge that, if we cease the threat of disconnection, the number of people who act irresponsibly and refuse to pay their water bills may well—indeed, almost certainly will—increase, and that what we do in the House, be it on taxes, benefits or any other matter, affects people's behaviour and whether they act responsibly?

Mr. Meacher: Of course I am concerned about the small number of people who can pay but leave it to the last moment or who refuse to pay, but, before the Bill was conceived, nine of the 27 water companies, of their own free volition, had already decided to dispense with disconnection. Indeed, that number has increased from six to nine this year. Of course we strongly support water companies having the power to obtain the money that is due to them and I am keen that they should pursue that vigorously.

Mr. Allan Rogers: The right hon. Member for Bromley and Chislehurst (Mr. Forth) gave the impression that people deliberately do not pay their bills, but such behaviour is rare. After privatisation of the water industry, the experience in my constituency was that old-age pensioners who had had their tariffs fixed on the

old rateable value and then moved into part-sheltered accommodation found that they had to pay four to five times the charge. They could not find the money to pay their bills and were in great difficulties. When I brought that matter up with Welsh Water, as it was then, it said that it could not vary the charge and the pensioners had to pay. Like most privatised companies, it had no way to help old-age pensioners to pay their bills.

Mr. Meacher: I am sure that my hon. Friend is correct.

Mr. Simon Burns: rose—

Mr. Gray: rose—

Mr. Meacher: Hold on. I have been asked a question and I intend to answer it. I would be the first to recognise that a tiny number of people simply refuse to pay until they are forced to do so, but I suspect that a majority of those who do not pay are very poor, and include many pensioners and unemployed. How many Conservative Members know the level of income support for an adult over 25? Can any Conservative Member tell the House what it is? Perhaps I may assist them. The level of income support for up to 10 million people is £50.35 a week, leaving aside housing benefit. Many people find it extraordinarily difficult to meet many of their basic bills, and the Government—unlike the Conservatives—believe that it is wrong to penalise people who cannot pay.

Mr. Burns: In answer to the intervention by the hon. Member for Rhondda (Mr. Rogers), the Minister said that his hon. Friend was right. Will he correct the record for the House and accept that—after privatisation and continuing this year—the number of disconnections by private water companies has fallen dramatically compared to when the industry was nationalised? In saying that his hon. Friend was right, the Minister has failed to explain to the House that many of the private water companies have schemes designed to help pensioners and the less well-off.

Mr. Meacher: The hon. Gentleman fails to understand the line of my reasoning. I am not obliged to correct anything, because I have never denied the points that he makes. I said clearly that there had been a welcome reduction in the number of households that face disconnection.

Mr. Burns: You said that the hon. Member for Rhondda was right.

Mr. Meacher: If the hon. Gentleman wants an answer, he should listen to it. Many pensioners are under great pressure because of their low incomes and a number are threatened with disconnection for that reason. However, that is entirely consistent with the fact that some water companies have introduced devices to help pensioners with their water bills. I think that about six out of the 27 companies have charitable trusts. Many regard themselves as running businesses, not providing social assistance to disadvantaged groups. I am concerned to protect everyone who properly needs protection, as that does not happen at present.

Mr. Gray: rose—

Mr. Meacher: I want to make one more point. More than half of the 640—a small number, but it is highly


significant if one is in that group, and it is cold comfort to be told that it amounts to less than 0.1 per cent. of the total—had no water supply for more than 48 hours. Perhaps hon. Members will think what that means. People cannot pay and they have no water to flush the loo, to drink or to wash themselves or their household objects.

Mr. Gray: rose—

Mr. Meacher: I will give way in a moment. Not only have more than half those people been disconnected for more than 48 hours, but our evidence shows that one third of them may have been cut off for more than four weeks. Is that a policy that Conservative Members believe is justified?

Mr. Gray: I think that the figures that the Minister used have been disputed. I believe that I am right in saying that two thirds, rather than half, of the 640 were reconnected within 48 hours. Perhaps the right hon. Gentleman could check that out. More important, will he advise the House how many of the 640 disconnections this year were schools and hospitals, which are exempt under the Bill, how many were second homes and how many were empty properties?

Mr. Meacher: Yes, we will certainly try to supply those figures. I think that those groups are a small proportion of the total. Under the Bill, schools and hospitals could not be disconnected, but second homes would still be liable to disconnection. The Bill concerns principal or only homes, but I will find out whether the evidence that the hon. Gentleman wants can be provided. I am sure that my figures are correct and that more than half those disconnected had no water supply for more than 48 hours.

Mr. Gray: rose—

Mr. Meacher: The hon. Gentleman can make his own speech in due course.
I do not find it tolerable or acceptable to expect consumers to live without water for such a significant period and I stand firmly by that principle. Therefore, we propose to prevent water companies from disconnecting customers in their principal or only home for non-payment. Nor do we consider that disconnection should be allowed for schools and hospitals, which provide vital services to the communities in which they are located.
Those proposals reflect—perhaps Conservative Members will reflect on this—present practice in much of the industry. There has never been provision for disconnection for failure to pay sewerage bills. As I said, nine water companies in England and Wales did not disconnect any households for failure to pay water service bills in the first half of this year and there is no threat of disconnection—nor has there ever been—for non-payment in Scotland or Northern Ireland. If those water companies, in such important and large parts of our country, can do without disconnection and run a perfectly good water service, that can be true throughout the country. The proposals should not have a major impact on water companies because of the relatively small number of disconnections.
Of course, we firmly believe that water companies have a right to the moneys that customers owe them and we vigorously support their recovering debts to which they are entitled. Companies will continue to be able to use a range of procedures to enforce payment of water bills, such as the use of bailiffs to recover money or goods and of attachment of earnings orders, garnishee orders or charging orders. Any such procedure incurs court charges, which are added to the debt to be paid. That is a significant disincentive to any non-payer who can pay, so the proposals clearly do not represent a soft option for customers. Under the Bill, there is no easy way out for non-payers who can pay.
Since we first announced our proposals to prohibit disconnection, several companies have been considering the use of devices such as trickle valves, which reduce flow to properties and cause significant inconvenience to customers, with the intention of enforcing payment. I hope that I have shown that our policies on disconnection reflect a deeply held concern about the health and hygiene implications if customers are deprived of a good supply of clean water. In line with that principle, I believe that we also need to act against the possible use of limiting devices as an alternative to disconnection. The Bill therefore makes specific provision to ensure that customers' well-being is not put at risk by the use of such devices.
Clauses 1 and 2 demonstrate the high priority that we attach to tackling the risks to public health of depriving customers of their water supply for non-payment. In view of our strong welfare concerns on the issue, we propose that the clauses should be commenced on Royal Assent.
My second theme is protecting vulnerable customers. Water bills will continue to be a significant expense for many customers, and we fear that certain groups of customers who have high unavoidable use of water could face particular hardship if they live in a property without a water meter. We therefore believe that carefully targeted protection needs to be offered to those groups. We propose to offer protection to two: large families on low incomes; and those with medical conditions requiring a high use of water.

Dr. Phyllis Starkey: My right hon. Friend is doubtless aware of the innovative schemes that some water companies have introduced. Anglian Water, which covers my constituency, has charging schemes for precisely the groups that he mentioned. Will he bear in mind the need to allow water companies to have their own innovative schemes that relate to their locality and so avoid a straitjacket that would mean that every water company would have to have exactly the same scheme for its vulnerable customers?

Mr. Meacher: I am grateful to my hon. Friend for raising that point. We are keen not only on the use of innovative tariffs, such as the rising block tariffs that are starting to be adopted and that we would like to be more widely applied, but on water companies advertising a range of methods and places of payment to make it easier. As the Opposition have hinted, we would like more water companies to develop charitable trusts. Those are all valuable ways of enabling people to meet their due water charges.
For the first group that I mentioned, we propose that protection should be available to families with three or more children in receipt of one of the following benefits: income support; income-based job seeker's allowance; family credit; disability working allowance; housing benefit; and council tax benefit.
For the second group, we propose that protection should be offered to those with conditions such as desquamating or weeping skin diseases, incontinence, abdominal stomas, ileostomies and colostomies, and renal failure requiring home dialysis. We propose that, to gain protection, customers would have to certify to the water company that they suffer from one of those conditions which causes them to need an unusually high amount of water. Of course, it would be open to water companies to verify information provided by customers.
We consider that the protection offered to those groups should be to have the option of a bill based on an average measured charge for the water company from which they receive their supply. That will ensure that customers with a high unavoidable use of water do not face unreasonably high charges related to the water that they consume, as that could give rise to hardship. I hope that that commands the acceptance of both sides of the House.
There are further ways in which water companies can assist vulnerable groups, as I said to my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) when she mentioned Anglian Water, which has introduced a special tariff that can be advantageous for families in receipt of benefit. I want to encourage all companies to consider how they can reflect social concerns in their charging and billing arrangements. Such initiatives offer water companies an excellent opportunity to demonstrate that they have regard for the interests of all consumers in a business that occupies a prominent position in the community.

Mr. Gray: Will the Minister give way?

Mr. David Heath: Will the Minister give way?

Mr. Meacher: I shall give way to the hon. Member for Somerton and Frome, who has not yet asked me a question.

Mr. Heath: I am following the Minister's argument closely. He proposes the extension of the use of rateable value as a mechanism. Is there a mechanism in the Bill that will in any way relate the notional rateable value either to the current property value or to the ability to pay? Is there a mechanism to deal with single occupancy of larger premises? If the answer to both those questions is no, am I right to assume that the only option for people who feel that they are disadvantaged by the proposals is to move to having a meter?

Mr. Meacher: I shall come to the question of rateable value shortly. It will be better if the hon. Gentleman listens to what I say and then responds. On his second question, he has a fair point. As I am sure that he already knows from having read the Bill, it contains no specific

provision on that matter. There is the option to apply for a meter, and we are making it easier for people to take up that option if that is what they want.

Mr. Peter Bottomley: Will the Minister give way on the point of rateable value?

Mr. Meacher: I am not on the point of rateable value. I am still on my third theme, which is increasing customer choice.

Mr. Bottomley: My question relates to the right hon. Gentleman's response to the hon. Member for Somerton and Frome (Mr. Heath)—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The Minister has not given way.

Mr. Meacher: The reason I have not given way, Mr. Deputy Speaker, is that I am going to address the matter of rateable value later in my speech. If the hon. Member for Worthing, West (Mr. Bottomley) wants to question me at that stage, I shall be happy to answer him.

Mr. Gray: Will the Minister give way?

Mr. Meacher: No, I want to make progress. The hon. Member for North Wiltshire (Mr. Gray) has already asked a question and many other hon. Members want to speak.
For many customers, there is little or no choice in charging arrangements; that fact is reflected in my postbag, and, I am sure, in those of many other hon. Members. I have received representations from some customers who are concerned that they may be forced by water companies to move to a measured charge—for example, because water companies fit a meter as part of associated works on pipes, or because water companies compulsorily meter whole areas. I also receive representations from customers who would like to have a meter, but who find that they are charged up to £150 for having one installed, which is an up-front cost that many less-well-off customers find unaffordable.
The Bill provides new rights for customers to remain on an unmeasured charge in their present home if they are using water only for normal domestic purposes. It proposes that the Secretary of State will have powers to specify particular cases in which water companies will be able to require customers to pay on a measured basis, for instance, where customers are using significant quantities of water for what we call discretionary purposes—a sprinkler, a swimming pool and so on—so that such customers understand the cost of the resources that they are consuming and have the right incentives to economise on discretionary water use.
Premises covered by that provision would include those that are used for commercial purposes, those where there is a garden sprinkler or swimming pool in use, those that have a power shower—which is defined as one consuming more than 20 litres a minute—and those using a water- softening unit that requires backwashing. Let me make it clear that the power would be an enabling power and that nothing in the Bill places an obligation on water companies to impose meters in any case. In addition, where water companies want to identify customers using water for discretionary purposes, we look to them to do so without taking an unduly intrusive approach.
I hope that I shall be able to make my statement on the question of rateable value before being asked a question. The vast majority of customers paying unmeasured charges do so on the basis of rateable values. Under current legislation, water companies would be prohibited from calculating charges in that way after 31 March 2000. The previous Government clearly intended to impose compulsory universal metering from that date.

Mr. Burns: What proof does the Minister have for that statement?

Mr. Meacher: There would be no other basis for charging after that date.

Mr. Burns: What proof can the Minister present to the House that that statement is factually correct?

Mr. Meacher: I have already made it absolutely clear that the previous Government intended to end the use of rateable values after 31 March 2000. That is the current position and that is exactly why we have put a measure in the Bill to remove that limit.

Mr. Burns: rose—

Mr. Meacher: I am sorry, but I will not give way again. The hon. Gentleman can respond to that point when he makes his own speech. The position is absolutely clear.
We reject that approach: we believe in choice and in proceeding by persuasion. That is why the Bill removes that deadline. The legislation will offer stability to customers and companies, protect households from any sudden upheaval and avoid the costs associated with an immediate and widespread change in the charging basis.
On the point raised by the hon. Member for Somerton and Frome, let me say that we recognise that the use of rateable values has significant drawbacks. The values were set some time ago, there is no mechanism for appealing against a value set for a particular property and there are no rateable values for houses built since 1990.
Therefore, it is understandable that some water companies and others are interested in developing alternative charging options. The option most commonly put to us is to allow charging based on council tax bands. The main arguments offered by proponents of that option are that it is a simple and well-understood system that would enable water bills to be based on a more up-to-date assessment. However, there is no firm evidence that a system that relates charges to council tax bands is inherently or automatically related more closely to consumption or the ability to pay than a system based on rateable values. It depends on the way that the arrangement is structured.
Any change to charging arrangements would produce winners and losers—and, according to some models, the use of council tax could produce a large number of both. Again, it depends on the ratio between the bands.

Mr. Tom Brake: Will the Minister give way?

Mr. Meacher: Yes, if the hon. Gentleman wishes to comment on this point.

Mr. Brake: Yes, I do. Is the Minister saying that he disowns the document entitled "Ending the Meter Mania",

in which the then shadow Environment Secretary, the present Secretary of State for Health, suggested that council tax banding was quite a fair and simple way of administering water charges?

Mr. Meacher: I am not saying that. I have made it clear that the Government believe that it is essential that any proposals for a new charging regime provide adequate assurances regarding transitional arrangements. We do not want to see a large number of winners and losers—the winners would be very pleased, but we are concerned about the losers, particularly if they include those from the poorer groups. That would be a major disadvantage of the council tax band proposal. It depends on the structure and the ratio between the top and the lowest bands.
We are perfectly willing to consider the options and any proposals that are brought forward. Some ideas have already been suggested—indeed, I recently met representatives from a water company and a non-governmental organisation who are pushing the council tax band proposal strongly. We do not have a principled objection to the development of charges based on council tax bands so long as the proposals are refined to address the difficulties that I have mentioned.
Promoting increased customer choice means giving customers the option of a measured as well as an unmeasured charge. The use of water meters is not the only way of reducing water consumption. We need to ensure that water companies have programmes and targets for reducing leakage. I emphasise that that is an important part of our plan.

Mr. Peter Bottomley: Will the Minister give way?

Mr. Meacher: I can see that I will not be able to make this speech until I allow the hon. Gentleman to intervene. Perhaps he would like to make his point.

Mr. Bottomley: I hope that the Minister will appreciate the point that I tried to make five minutes ago, where it would have fallen more naturally. Is it not a disgrace that an elderly single pensioner living in a bed-sitting room may at present be required to pay £185 a year, whereas the water company would say that, if she had a meter, the likely charge would be between £120 and £140 a year? During the Committee stage and before the Report stage of the Bill, will the Minister consider what sense of urgency he is willing to put into the legislation so that, perhaps by the end of 1999, every pensioner in those circumstances will have received an estimate from his or her water supplier of the gain to the pensioner if a water meter were installed during the next 12 months?

Mr. Meacher: I am pleased to say that I have good news for the hon. Gentleman. The Bill contains such proposals—Christmas has come early. We propose that customers should be able to opt for a meter to be installed free of charge by serving a measured charges notice on the water company. I know that that is not exactly what the hon. Gentleman suggested, but it comes to the same thing. If a pensioner wants a meter, he or she will find it easy to obtain one by serving a notice on the water company.
The Bill contains additional protection for customers. Some of those who serve a notice on the water company may be worried that, at the end of a year, they will be


worse off, and for that reason may not prepared to take the risk. They will be able to revoke the notice within the first year if they would prefer to revert to an unmeasured charge.
We are conscious of exactly the group to which the hon. Gentleman refers. We are making it extremely easy for them. The cost of a meter is £150 to £200. That will be provided free by the water company and, if it is not in their interest, customers will be able to revert to the previous system.

Mr. Graham Brady: rose—

Mr. Meacher: This is probably the last intervention that I shall take.

Mr. Brady: I am grateful to the Minister. If metres are to be made available free of charge, and given that those who want a meter installed are generally those who will benefit from it, is it not inevitable that water charges for those who do not have meters will increase? Will that not be a pressing difficulty for those who do not fall into the poorest category and get relief, or do not benefit from a meter?

Mr. Meacher: The hon. Gentleman asks a fair question. The outcome depends on the rebalancing of the tariff basket. At present, about 14 per cent. of households have a meter. That figure is increasing at a rate of 2 to 3 per cent. a year, and we expect the rate to accelerate as a result of the Bill. If it became a flood, that would be a serious matter.
The cost of selective and optional metering under the Bill, as well as the metering that the water companies already intended, is estimated by Ofwat at £300 million in the period 2000 to 2005. That relatively small cost must be compared with the £8 billion to £8.5 billion that is the extent of the environmental quality investment programme that the water companies will be required to carry out. The hon. Gentleman's point is relevant, but the situation will be perfectly manageable.
Many of those who request a meter will be owner-occupiers, but there will also be tenants who could benefit from paying for water on a measured basis. That group is likely to include many of those among the least well-off, for whom any savings in costs would be particularly valuable. We estimate that as many as 54 per cent. of households in receipt of income benefit would gain from a switch to measured charges—not just the well-off, but a large proportion of the poorest would benefit.
It would not be right to discriminate between owner-occupiers and tenants. We therefore believe that tenants should have the same options as other customers to request the installation of a meter. For practical purposes, we propose to exclude that option for those with fixed-term tenancies of less than six months, because the customer would not be in residence long enough to benefit from the savings that may be made from having a meter.
We have prepared a regulatory appraisal to accompany our proposals, which makes it clear that the industry's compliance costs are low in relation to its turnover. I mentioned the £300 million figure, which includes the metering that companies are already programming in the

absence of Government policy on this issue. That figure is taken into account in the director general's assessment that substantial price cuts can be afforded in 2000. The director general proposes cuts of as much as 15 to 20 per cent. after taking account of the increase in metering.
When customers move to a measured charge, other charges may have to be adjusted to take account of any shortfall or increase in the revenue to the water companies. The consequences for other charges will depend on the rate of switching, the characteristics of those for whom meters are installed and the manner in which costs are apportioned between different customers, which is a matter for water companies. Customers often opt for meters because their measured charges will be lower than their previous bills—tests show that it could be as much as 10 or 11 per cent.—which implies that they have been overpaying relative to their water use for some years. Putting their charges on a fairer basis inevitably has implications for the charges of other customers. We believe that the effect will be manageable within the annual changes in bills.
On delivery mechanisms, we propose that the Director General of Water Services should approve water companies' annual charges schemes. That formalises existing practice, under which the Office of Water Services is consulted by water companies on the preparation of their charges schemes. The Secretary of State will be able to give the director general guidance on the exercise of his power to approve charges schemes, and he will also be able to specify in regulations particular issues to be covered in charges schemes, such as social and environmental objectives—which remain a key part of our aims—and protection for vulnerable groups.
We do not propose that the use of such powers should conflict with the prime responsibility of the Director General of Water Services, which is economic regulation. The powers are deliberately circumscribed to ensure that they are not used to limit the total revenues of relevant undertakers. That will prevent the Secretary of State from making regulations that affect the overall price limits set by the director general following a periodic review. That is an important point, because it removes any risk that this mechanism could be used to create uncertainty about the effect of regulations on the companies' income.
Part I delivers our commitment to introducing a system that provides fair and affordable water charges, especially for vulnerable customers, while ensuring the sustainable use of water supplies and the protection of the aquatic environment. Part II contains provisions to improve the arrangements for regulating the water industry in Scotland.
The Under-Secretary of State for Scotland, my hon. Friend the Member for Western Isles (Mr. Macdonald), when he winds up the debate, will comment in more detail on the provisions in part II, but I shall briefly set the scene. The need for new arrangements was identified in last year's Scottish water industry review. My right hon. Friend the Secretary of State for Scotland announced the findings of that review to the House in December last year. As he explained, the review recognised a consensus that the existing arrangements for regulating the water industry in Scotland were not satisfactory. In particular, the current division between price regulation by the Scottish Water and Sewerage Customers Council and efficiency regulation by the Scottish Office had proved untenable.
The review recommended that those functions should be united by the creation of a new professional regulator, responsible for all aspects of economic regulation and for promoting the customer interest. My right hon. Friend promised that the Government would legislate to improve the system of regulating water prices in Scotland, to strengthen the pressure for efficiency in the Scottish water industry, to create greater financial stability for the industry and to retain a strong, independent customer voice.
Those commitments are delivered in the Bill. It establishes a water industry commissioner for Scotland, who will operate independently of Scotland. It also establishes water industry consultative committees for each of the three water authorities in Scotland, which will constitute an independent source of advice for the commissioner in regard to customer interests.
The framework for advising Ministers on charges will include a number of changes from the current arrangements. For example, it will provide for the commissioner's advice to cover periods of several years. The matters that the commissioner is to take into account in framing his or her advice are specified. Perhaps most significant, the commissioner will be required to publish the original advice and any amendments made by Ministers, thus ensuring a transparent price-setting process.
This is a relatively small but, I think, important and valuable Bill, providing significant benefits for millions of people. It will protect vulnerable groups; it will prevent disconnections; it will extend consumer choice; and it will enhance conservation in the interests of the environment. I strongly commend it.

Mr. Simon Burns: The Minister for the Environment ended his speech by saying that his was a small Bill. In that regard I agree with him, but I also believe that it represents a missed opportunity for the Government.
Following the hyperbole of last year's water summit and the rhetoric of Ministers since, the Government have ducked some of the most important issues affecting both the industry and its customers. No part of the Bill deals with the issue of enhancing competition, which would benefit the industry and its customers alike. Nor does the Bill say much about improving the environmental impact of water use or, indeed, provide any strategic overview for the industry.
Instead of tackling those difficult but important issues, the Government have, in most instances, simply gone for the soft, populist options involving metering and disconnections—throwing in for good measure some rather nasty, neanderthal Labour-type powers for the Secretary of State and the regulator in clauses 4 and 5. That is probably rather appropriate. Even in this day and age, the Minister is renowned for being old Labour, so it is nice that a new-Labour Bill should still contain some old-Labour measures.
Sadly, though, the Government cannot resist ducking the important issues. Given the choice, they will always go for the soft options, in the hope that that will please their focus groups. I believe that, in time, they will regret their timidity in the Bill.
I appreciate the need for a water Bill at this time. The immediate urgency is plainly dictated by the need to extend the use of the old rateable-value system beyond 31 March 2000 as a basis for charging those without a meter, which is dealt with in clause 8. I do not object to that. The last Conservative Administration—apparently, the Minister is not aware of this—recognised that such a policy would have to be introduced, and the law amended, if we were returned to office after the general election.

Helen Jackson: rose—

Mr. Bob Blizzard: rose—

Mr. Burns: I will give way to the hon. Member for Waveney.

Mr. Blizzard: Why, then, was the original arrangement introduced in the Water Industry Act 1991? Does that not show that the then Government's real agenda was to impose water meters on the whole country, and that only the groundswell of public opinion knocked them off their course?

Mr. Burns: May I first point out that the 1991 Bill is a consolidation measure? The provision was in the original Water Act 1989, which brought privatisation. Secondly, the hon. Gentleman may not be aware, because he was not in the House at the time, that all the provisions emanated from the introduction of the community charge in 1988–89.

Helen Jackson: rose—

Mr. Burns: Will the hon. Lady just contain herself for a minute?
It was expected that, in the ensuing 10 years, a system would be devised to cope with the problems that resulted from a rateable value that was based on valuations dating back to 1973. As everyone knows—it is now history—what happened was that the council tax replaced the community charge in the early 1990s and, rightly or wrongly, the previous Administration did not get around to working out—[Laughter.] It is a self-evident fact. Before the 1997 general election, they did not get around to addressing the problem, but for the Minister for the Environment, in a typical Millbank smear, to suggest that that meant that the previous Government were planning to force meters on to every household is patent nonsense.
Before the last election, we were on record as recognising that we would have to amend the law because we were not prepared, as a Government, to force water meters on to every household. That is why I have just said that we do not object to clause 8; it does something that we, too, would have done if we had been returned after the last general election.

Dr. Peter Brand: Will the hon. Gentleman give way?

Helen Jackson: Will the hon. Gentleman give way?

Mr. Burns: I give way to the hon. Lady because she has been asking more often.

Helen Jackson: I am grateful to the Minister—

Mr. Burns: Thank you.

Helen Jackson: I am grateful to the shadow Minister for setting the record straight that the privatisation of the


water industry was based on the same philosophy as the introduction of the poll tax. Why does he think that the former Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer), who is not in the House today, and whom I asked many parliamentary questions on the very issue of water rates, did not once respond to any of those parliamentary questions and say that he recognised the need to extend the use of rateable value beyond 2000? Was it because he simply could not bring himself to recognise that the poll tax—and the philosophy that led to it—was such a total failure?

Mr. Burns: The straightforward answer to the last part of the hon. Lady's question is no. The answer to the first part—which I think the Minister would be reasonable enough to accept because he alluded to it—is that, to start with, after the introduction of the council tax, what we were going to do after 2000 was looked into. As the Minister is finding out and mentioned in his speech, it is highly complicated and difficult to ensure that it is a fair system. I will refer later to that aspect of the problem.
Given the electoral cycle, we then ran out of time and were unable to come up with a viable alternative. In the same way, the Government—this comment is not a criticism—have not so far been able to come up with an alternative, hence clause 8, although I know that they are consulting the industry to try to find out whether there is a viable alternative.

Mr. Richard Burden: Will the hon. Gentleman give way?

Mr. Burns: If the hon. Gentleman will forgive me, I am going to make some progress.
I should like to press the Minister on that issue because Conservative Members would like to know a little more about his thoughts. Possibly the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), who is winding up the debate, could give us some answers on how and when he expects the rateable value system to be changed.
I understand that some water companies would like to transfer from the rateable value system to a link with the council tax banding system. As the Minister for the Environment mentioned, it is well known that the Government are not convinced of the merits of doing that because they fear that that would lead to a high-incidence effect, whereby customers on the lowest council tax—band A—would possibly, or almost certainly, pay more, and those at the top in band H would pay less.
Are the Government considering ways to deal with the problem within the council tax system, or will they entirely rule out using the council tax band system? If so, do Ministers have any thoughts on what system—it may be a totally new one—they might use if they do not use the rateable value system? I am sure that both Opposition Members and Government Members would be interested and grateful to hear the Minister's thoughts on the issue.
I accept that disconnection for non-payment of charges is a highly emotive subject. I should, therefore, like to put current practice into context before dealing with the proposals in detail.
Water companies currently have the power to disconnect customers who have not paid their bills. Under the Office of Water Services code of practice, in virtually

all cases in which domestic customers have fallen into arrears, a water company will be able to disconnect only after it has obtained a court judgment in its favour. There is also a special provision in the licence that the supply of water to domestic premises should not be disconnected if the person liable for the charges informs the company that he or she is applying for help from the Department of Social Security or from local authority social services, and for as long as those bodies ask the company to delay disconnection.
If one compares that practice with that of other privatised companies supplying essential services—gas and electricity—one discovers that their legal requirements on disconnection are broadly similar, as they have a legal right to disconnect for non-payment. However, it is necessary for the other services to obtain a court order only if the customer does not consent to disconnection and utility staff need access to the premises to perform the disconnection.
As I said in an earlier intervention, it will undoubtedly come as the supreme irony to those opposed to water privatisation that, since water privatisation, water disconnections have fallen dramatically. Pre-privatisation, in 1988-89, there were 15,255 disconnections.

Mr. Steve McCabe: I should like simply to clarify the point being made by the hon. Gentleman, who is talking about officially recorded disconnections. If disconnections forming part of the court case on budget payment units involving Birmingham city council and other local authorities were added to the figures, surely he would accept that a disguised and substantial number of disconnections are being hidden in that very process.

Mr. Burns: The hon. Gentleman is absolutely right: I am talking about official disconnection figures, and not the figures as they may apply to budget payment units.
In 1997-98, the most recent full year, there were 1,807 disconnections. As the Minister said in his speech, in the first six months of this year, there were 640 disconnections.

Mrs. Teresa Gorman: I hope that my hon. Friend will point out also to the Government that—in addition to the Ofwat recommendations, which are very closely adhered to—regional customer service commissions are brought in to investigate each and every threat of domestic disconnection, to ensure that those who are in vulnerable circumstances are not involved. Therefore, those who are cut off are not the "can't pays" but the "won't pays".

Mr. Burns: I am extremely grateful to my hon. Friend, who—with her customary perspicacity—has anticipated a matter that I shall deal with a little later in my speech.
As I said, in the last full year—1997–98–there were 1,807 disconnections and, as the Minister said, there were 640 disconnections in the first six months of 1998. It should be noted that two—not nine, as I think the Minister said at the beginning of his speech—of the 27 water companies currently operate a non-cut-off policy. Nine have carried out no disconnections this year, which is not quite the same as a deliberate no-cut-off policy, although I fully accept that the result is the same.

Mr. Gray: My hon. Friend will have noticed that, in an earlier intervention, the Minister apparently was not


aware of how many of the 640 disconnections were domestic, of empty houses or of hospitals and schools. Does my hon. Friend agree that the Bill relates to the method of charging after 2000, and that the little bit about disconnection is not to save any unfortunate people who find themselves in such a position, but is about political correctness? It is about soundbites and headlines, and not about realities at all.

Mr. Burns: I am extremely grateful to my hon. Friend. In many ways he has hit the nail on the head with a hammer.
In my region, Anglian Water—

Mr. Meacher: In view of what the hon. Member for North Wiltshire (Mr. Gray) has said, may I give the disconnection figures to the House? They show that he was not quite right. There were none for schools, none for hospitals—

Mr. Burns: Surprise, surprise.

Mr. Meacher: Exactly, but that is the point that the hon. Member for North Wiltshire made.
There were about 20 disconnections of empty properties, and 47 per cent. of disconnections were for under 48 hours. In other words, 53 per cent. of disconnections were for more than 48 hours, and more than a third were for more than 28 days. Think what being disconnected for more than four weeks means.

Mr. Burns: I am pleased to have given the Minister the opportunity to put those figures before the House and on the record.
In my region, Anglian Water's disconnections have fallen from 978 five years ago to 56 last year. This year it has disconnected only 16 households in an area with 2.4 million properties. To give another example, North West Water—

Dr. Starkey: Will the hon. Gentleman give way?

Mr. Burns: Would the hon. Lady please wait?
Last year, North West Water disconnected 93 homes out of 2.6 million. Those figures simply put into context the current situation compared with that 10 or 15 years ago, when disconnections were a far more significant and serious problem. I in no way underestimate the problems facing people who are disconnected.

Mr. Burden: rose—

Dr. Starkey: rose—

Mr. Burns: I should like to make a little more progress.
Those figures show that the water companies are reluctant to cut people's water off. As my hon. Friend the Member for Billericay (Mrs. Gorman) said, they prefer to work with individuals who are in difficulty and use their legal powers only as a last resort. I believe, and I hope that the House would agree, that that approach is responsible and realistic.
In some ways, the Government's disconnection proposals are a quick-fix, populist measure. Although disconnection of domestic supply will be illegal, the water companies will, as the Minister rightly said, still be able to use the civil courts to pursue non-payers who persistently refuse help and do not pay. In effect, although the water companies will not be able to disconnect, they will still be able to use the courts to retrieve money owed to them. It may be argued—[Interruption.] I am glad that the Minister agrees. I am trying to be reasonable and realistic.
Given that a majority of disconnections—or, in the light of the figures for the first six months of this year and those that the Minister has just given to the House, a large minority of disconnections—were restored within 48 hours, it could be argued that the threat of an individual losing personal belongings such as compact discs, televisions or videos for non-payment would be a greater incentive to pay than disconnection. Some people may not agree, but I believe that if an individual is given the choice between having his water cut off for up to 48 hours and losing some of his belongings to the bailiffs—and not getting them back—the latter will be a great incentive to pay the bill.

Several hon. Members: rose—

Mr. Burns: I find this extraordinary. I am slightly uncomfortable when Labour Members agree with me, but when one is talking common sense, it should not come as a great surprise.

Mr. Burden: Will the hon. Gentleman give way?

Mr. Burns: No, please do not spoil it.
Similarly, I am not convinced by the argument made by some that, with the withdrawal of the power of disconnection, the cost of recovering money from customers will significantly increase bad debt and costs to the water companies. My scepticism of that argument is twofold. First, the threat of the bailiffs is a powerful disincentive to the "won't pay" brigade. Secondly, at present, water companies have to go to court for an order to disconnect, which involves costs for them. As the Minister said, when the companies apply for a court order for an attachment of earnings or to send in the bailiffs, they will have the right to pass on the legal costs to those whom they are taking to court. Getting an order to send in the bailiffs is a direct reflection of present practice, except that it will be to recover costs or for an attachment of earnings rather than to disconnect the supply.
I have some questions for the Minister on the issue. Have the Government carried out a full and, as far as possible, accurate business impact assessment of the effects of the clause on the water companies? Have the Government estimated whether there will be a noticeable increase in the number of "won't pays", or do they share my analysis that, after possible initial problems caused by a new system, there will not be a noticeable change? If the Minister has any figures or assessments, I should appreciate it if he could let us see them.
Why does clause 1(1) and (2) seemingly—I am choosing my words carefully—apply only to domestic properties that are main homes rather than second residences, hospitals and schools? What is the rationale for limiting the provision to such premises? Are not


private residential and nursing homes equally important—or universities, colleges of higher education, children's homes or companies that supply medical needs to hospitals or to the country? The list could be endless. I am puzzled about why hospitals and schools have been singled out. No one would argue that a residential nursing home or a children's home was less important than a hospital or a school.

Mr. Leigh: Does my hon. Friend agree that there is a problem with sending in the bailiffs, because it may be difficult to prove ownership? Although rarely used, disconnection is a useful threat. Does my hon. Friend believe that the number who do not pay their bills will increase? The measure may be considered populist, but it may be less popular among those on low incomes who pay their bills.

Mr. Burns: Some people from the "won't pay" brigade will do all that they can to avoid having their personal belongings taken by bailiffs. However, that is not the only weapon in the armoury. Water companies can go to court to seek an attachment of earnings or of benefits such as income support, as well as using the other measures that the Minister mentioned. I suspect—although it will be difficult to prove until we have firm evidence of it—that initially, there may well be an increase in people seeking to avoid paying because the penalties appear lighter, but when the system starts working and people are faced with bailiffs or attachments of earnings, they will realise that they risk losing their videos and compact disc players, and that will be a powerful incentive. Personally, I would rather have my water cut off for 48 hours than lose my television and video and never get them back.
On my hon. Friend's final point, I agree that the Government think that they are introducing a populist measure, but when people face attachments of earnings and risk losing their property, it will not be popular, and that supports the argument that it will be an incentive for people to pay their bills.

Mr. Burden: I am grateful to the hon. Gentleman, who is making a powerful case for the provisions that relate to disconnection. If I understand him rightly, he is saying that he agrees that "can't pays" should not be disconnected. What is the Opposition's view on so-called budget payment units, pre-payment meters and trickle valves, as water companies have been rather ambiguous about whether they relate to "can't pays" or "won't pays"? The Government have made it quite clear that they are suspicious that trickle valves are a way in which to avoid disconnection. Do the Opposition agree? [Interruption.]

Mr. Burns: I am not going to duck that point, so there is no point in Labour Members laughing and making a big deal of it. I shall turn to help for vulnerable groups later in my speech. On trickle valves, if disconnections are to be banned by law, by definition trickle valves should also be banned and the Bill does that.
The hon. Gentleman may have slightly missed the thrust of my speech. I am saying not that I agree positively with what the Government are doing, but that they are legislating for what already happens in respect of the vast majority of water users. When the Bill becomes law, instead of using the courts to disconnect, water companies will have the power to use the courts to recover their money through other means.
I should now like to turn to the clauses dealing with water metering. Again, it appears that the Government are being pushed along on a populist wave and are putting into law the practice that the majority of water companies already operate voluntarily. Rightly in my view, the Government have said no to compulsory metering for all, but are legislating to make water companies install meters on request free of charge and with the option to go back to the rateable value basis of payment within 12 months if the customer does not like the meter system or, more crucially, does not like the water bills.
On environmental grounds, water meters are very environmentally friendly, especially in areas of sparse supply. To many customers, especially the elderly, single people living alone or families without children, they are probably financially friendly too. As the Minister said, only approximately 14 per cent. of households have meters and I believe that a significant proportion of them live in houses built since 1990–91. It is self-evident that the more households there are with meters, the more it helps environmentally. Thus there is an incentive for water companies to encourage and persuade people to switch to meters because rateable value customers have no incentive to be water efficient. That is exactly what many companies are doing.
Of the 27 water companies in England and Wales, 15 supply free water meters, including five of the nine largest companies. Charges for the other companies range from an average cost—so that nobody starts throwing around other figures, it should be understood that the Minister tended to use maximum costs—of £14 in an existing chamber to £60 within the boundary. A number of companies allow households to revert to the rateable value system if they do not like their meters.
Last year, Anglian Water conducted a metering exercise in Bury St. Edmunds. Meters were installed in about 12,000 homes and customers were invited to choose between continuing to pay their bills based on rateable values or paying metered charges; 52 per cent. of customers voluntarily elected to pay metered charges. At the end of the 12-month period, 5 per cent. switched back to rateable value bills. The House will agree that that is a very small proportion of the total numbers.
There is a line of argument that the provisions will cost water companies dearly. I am not totally convinced, because the majority of water companies already operate a similar policy. There are also those who say that rateable value customers will be subsidised by meter customers or that prices will be higher than they otherwise would be if everyone were metered. However, even if that is true, the system exists today, so the Bill will not alter the position significantly—or certainly not before the Government reach a strategic view on the future of rateable value billing systems, if they ever come up with a system that they find acceptable.
There are, however, a number of questions that need to be answered on this part of the Bill and I would appreciate answers, if not today, when we discuss the fine print in Committee.
The Minister mentioned the business impact assessment that has been conducted on this part of the Bill. First, I would be grateful if Ministers could let us have precise figures—not those relating to the impact of the Bill plus the existing practices of water companies, but in respect of the impact of the Bill alone. Secondly, what research,


if any have the Government carried out on the environmental implications of clause 6, especially in areas of water scarcity? Thirdly, if a household installs a meter and then moves to another home after 12 months, will the new owner have the option of reverting to the rateable value system or does the law take the view, "Caveat emptor. You buy the house knowing what comes with it so you are stuffed."

Mr. Meacher: indicated assent.

Mr. Burns: I see the Minister kindly nodding in assent, so I take it that a household moving into a house after 12 months have elapsed since the installation of a meter will have no option to go back to the rateable value system. I find it helpful that he has clarified that point.
Finally, let me turn to clauses 4 and 5 which deal with the making and approval of charges schemes and the Secretary of State's regulatory powers. To be quite frank, they are very nasty powers—a throwback to the days of Government intervention in the marketplace. They show that, underneath new Labour, the Government still hanker after the interfering, nannying powers that they so enjoyed using in the past. It is self-evident that any decent person wants to provide help to those who need special protection, but help does not have to be provided through the political interference of a Secretary of State. Currently, water companies make special provision for vulnerable customer groups.
North West Water, for example, has an extra care services scheme to help elderly customers, customers with a disability or a serious illness and those with sight or hearing difficulties. The help includes steps to ensure that customers receive a constant supply of water. The company employs two counsellors to visit customers at home to offer them help and advice when they get into difficulties, a scheme similar to the one that my hon. Friend the Member for Billericay mentioned.
Anglian Water, which covers my area, has a number of innovative schemes, including SoLow, which helps elderly customers—whom the hon. Member for Milton Keynes, South-West (Dr. Starkey) mentioned—or those on benefit by removing the standing charge and charging a slightly higher rate per cubic metre. Its Plus 4 scheme assists the larger low-income families who use more than average amounts of water by raising the standing charge but cutting the volume rate. Giving the Secretary of State extra powers to interfere will stifle the incentive for water companies to employ an innovative tariff strategy.

Dr. Starkey: Will the hon. Gentleman give way?

Mr. Burns: I will give way to the hon. Lady who, although she does not know it, has cost me dearly this evening. I hope that my giving way to her will not cost me more.

Dr. Starkey: I am intensely flattered by the hon. Gentleman's comments on my effectiveness. In answer to my earlier intervention, my right hon. Friend the Minister pointed out that his intention was not to stifle innovation by water companies, but to ensure that the worst companies lived up to the standards that the best companies have adopted voluntarily.

Mr. Burns: I, too, heard the Minister's reply, but I will believe it when I see it. With his honeyed words, he no

doubt believes himself to be a reasonable and decent human being, but he will not always be the Minister for the Environment. A different Minister in a different climate, with a different attitude to the water companies, will also have powers under clauses 4 and 5 to do almost anything. That is a throwback to the interfering, nannying and regulatory approach of previous Labour Governments. Putting such powers on the statute book will provide a dangerous precedent.

Mr. Meacher: The hon. Gentleman must not spoil his speech, which has been very welcome; he has endorsed much of what the Bill does and I am grateful for his understanding. On this point, however, he is wrong. The clauses are drafted in such a way as to circumscribe the powers so that there can be no question of interfering with the proper economic regulation that is laid down by the Director General of Water Services; there will be no threat to the water companies' revenue base. The hon. Gentleman is wrong to suggest that the clauses contain a new, wide-ranging power which will threaten the water companies; they merely formalise what is already in place in the guidance to the director general.

Mr. Burns: Obviously, we can return to that in Committee. My point is that the Government are laying themselves open to the charge of social engineering by deciding who should be assisted and by imposing that decision on the water companies; they could shift to the water companies their responsibility to assist vulnerable groups through the benefits system.
The Minister will not want to admit that on the Floor of the House, and we will be able in the not-too-distant future to discuss the matter in greater detail in Committee, but I am firmly of the view—it has not been altered by anything that the Minister has said—that clauses 4 and 5 are a blunt instrument, which will probably fail to take into account wide regional variations in the problems and circumstances that face water companies and water supply.
As the Minister knows, different water companies charge different prices for water and sewerage, but the proportion of income support to help to pay water bills is constant across the country. In July last year, he told the Environment Sub-Committee that he would not press for that proportion to be variable. Perhaps he will now reconsider the matter; I express no opinion on it except to say that, logically, the system should be brought into line with the system that applies to housing and council tax benefit, which is variable down to individual rent and council tax.
No one would disagree with the gist of the right hon. Gentleman's words—that water is an essential to life. Given that that is so, however, surely there should be a variable element in the benefits system to help the less well-off to pay their water bills, just as there is a variable element for housing and council tax benefit. It was illogical for him to reject that out of hand when he spoke to the Environment Sub-Committee. I suspect that he agrees with the logic of my argument, but he knows that his views would not, because of their cost implications, be approved by the Treasury in a month of Sundays.
Conservative Members are concerned about the wide-ranging powers that clause 5 invests in the Secretary of State. In Committee, we shall look very carefully at the


clause and at a number of issues that arise from the provisions on disconnecting, metering and Scotland. Because much of the Bill enshrines in legislation what most water companies are already doing in practice, I shall not ask my hon. Friends to vote against its Second Reading. However, we will carefully consider its provisions in Committee before it returns to the Floor of the House on Report and on Third Reading.

Helen Jackson: The Tories' failure to understand the basic proposition with which my right hon. Friend the Minister began his speech—that water is an essential public service—was why when, before the general election, one mentioned the water industry and fat cats, most electors were halfway to putting their cross by a Labour candidate's name. Their misunderstanding of what a public service such as the water industry meant was a significant factor in their whole-hearted rejection by the country.
On 11 May 1993, I introduced a ten-minute Bill—the Water (Domestic Disconnections) Bill. I did so because, on 28 April, I had received a parliamentary answer that contradicted what the hon. Member for West Chelmsford (Mr. Burns) has said; it spelt out how, in the year following privatisation, domestic disconnections rose threefold, from 7,000 to 21,000. Nobody at the time said, "This is appalling"—the Conservative Government certainly showed no signs of being worried. In the same year, there was an equally disturbing increase in the number of cases of dysentery, especially in large conurbations such as Birmingham. Public health authorities and environmental health officers were concerned about the public health dangers of leaving a household without running water, and I pay tribute to the Chartered Institute of Environmental Health, and officers such as Howard Price, for devising a Bill that would have outlawed domestic disconnections.
The Bill was supported by hon. Members on both sides of the House. The former Member for Batley and Spen—a Conservative—many other hon. Members and I all made the point that, if housing legislation provided that a house without running water was not fit for human habitation on public health grounds, we should have no part as a Parliament in allowing private water companies to deprive homes of running water. That would, in itself, create a public health risk. That is the view of the British Medical Association, the Royal College of Nursing and anybody involved in public health in this country.

Mr. Shaun Woodward: Nobody in the House would disagree with the hon. Lady about public health, and no one would wish to see any truly vulnerable person cut off. However, we must be careful not to distort the picture. The hon. Lady chose the figure of about 20,000 disconnections in the first year after privatisation, but she well knows that, in the previous year—when water companies were in the public sphere—there were about 15,000 disconnections. If the hon. Lady thinks that privatisation is such a bad thing, can she explain why that figure of 20,000 disconnections—which I accept—has fallen to such a point that, between April and September

this year, there were 640 disconnections, two thirds of which were followed by reconnection within 48 hours?

Helen Jackson: I was expressing concern about disconnections, not privatisation, and I am glad that the hon. Gentleman believes that everybody in the House should agree with me. I hope that that is partly why every hon. Member will support the Bill in the House tonight. The numbers have fallen from that appalling figure of 21,000 is not only because of the public concern generated at the time, but because—in response to that concern—many water companies started to introduce pay-as-you-go systems, resulting in the budget payment meters with trickle-valve systems which, in the end, had the same effect. The hon. Member for Witney (Mr. Woodward) looks puzzled, but such systems do leave domestic properties without water.
To their credit, local authorities—particularly those in large urban communities—and public health institutions became extremely concerned that the accelerated introduction of budget payment units, particularly in Birmingham and the north-west, created a serious public health risk. Those authorities challenged the scheme and, with the help of my hon. Friend the Member for Birmingham, Northfield (Mr. Burden)—who had a subsequent Adjournment debate on the subject—they mounted a significant campaign to raise those concerns. The official disconnection rate started to fall because so many companies introduced budget payment units.
If all hon. Members agree that we should not leave a house without access to running water, they will fully support clauses 1 and 2 of the Bill, which the hon. Member for West Chelmsford (Mr. Burns) spent so long saying were not good.

Mr. Brian White: A number of people use pre-payment budget meters as a way of budgeting and want to continue with that. What would my hon. Friend say to them?

Helen Jackson: That is a very good point. My right hon. Friend the Minister made it clear that one of the purposes of the Bill as regards charging systems is to encourage water companies to enter into many flexible arrangements to make it easy for their customers of restricted means to pay for their water. Any budget payment system by which households can pay more easily is to be welcomed. However, we should not welcome the hidden cut-off within those systems which could leave households without water.
The fact that the Conservatives are still exercised by this issue exposes the flaws in their philosophy, which dates back to the time of privatisation. At that time, everything that we received as a public service had to be part of the market and had to be seen as a commodity—whether it was the sun, the rain or the air—and putting obviously public commodities into the hands of private companies somehow gave those companies the green light to maximise their profits by profiteering.
All of us in the Chamber tonight should be thankful for the early action of this Government in ensuring, through the windfall tax, that those moneys obtained by profiteering will now, instead of going into the pockets of the privatised water companies, create jobs and training through the new deal. Without the change of Government,


that shift of thinking would not have happened, and we would still have a Government with a knee-jerk response who would say that any privatised utility was bound to be wholly good and that any suggestion otherwise was bound to be wrong.
That exposes the Tory philosophy on these matters, but it also exposes the failure of the previous Government fully to understand the structure of the water industry's costings. When we pay our water bills, we are paying not simply for the water that comes out of the tap, but for the management of the whole water environment. We are paying for the way in which reservoirs are managed, for leisure activities on them, for the wetlands, for waste water management, for sewerage and for the treatment of drinking water. The last accounts for less than 50 per cent. of the costs of the industry. The volumetric element—how much goes through the taps—accounts for one quarter of the rest of the fixed costs of supplying drinking water.
The assumption that payment must be on the volume of water that an individual uses in the home bears no relation to the actual cost structure of the industry. Inevitably, therefore, problems are built into that assumption—which brings me to the second element of the Bill: the section on charging systems.
I welcome the end of compulsory metering, and the introduction of much more flexibility and choice in the way in which companies and customers can approach the water charging system. As part of that, it was clearly necessary to extend the option of using rateable values beyond 2000. It is important to recognise that the chief argument against universal metering—it is supported by most water companies—is that it is very expensive. On top of the capital expense of introduction, there is the year-on-year cost of an individual bill based on a volumetric amount, measured by a device that has a limited life, is bound to go wrong, will need maintenance and checking and is open to contradiction. A fixed charge based on a property does not change a great deal from year to year and overhead costs are significantly lower, as most water companies generally recognise.
Both the British Medical Association and the Royal College of Nursing would view universal metering as worrying on health grounds. I am concerned about the pensioners on low incomes who worry about the cost of water every time they boil a kettle for a cup of tea. That is not an effective way of ensuring public health.
The households that gain from a switch from an unmeasured to a measured charge are those that pay at the top rate, and the extra costs will have to be borne by others.

Mr. Woodward: I share some of the hon. Lady's reservations about metering, but who does she think will pick up the tab when people move from a fixed charge to metering?

Helen Jackson: The water companies will pick up the tab, as they have the job of managing the system as efficiently as possible. A huge part of their responsibility involves introducing an equitable method of charging. I warmly welcome the Minister's proposals to encourage water companies to come up with schemes that make the charges fair, but I am seeking clarification because the choice in the Bill appears to be rather one way.
People can move, at no charge, from unmeasured to metered charges, but I would like domestic customers also to have the choice to move to a notional rateable value if their houses are built after 1990, or to some other form of unmeasured charge. I hope that the companies will take that possibility seriously, as it would reduce their overheads, and there would be a two-way choice. I am sure that Ministers will take up those points in Committee.
In conclusion, I welcome the introduction of flexibility in charging systems, but I believe that customers should have a two-way choice; mostly, I welcome the recognition, running right through the Bill, that the management of our total water resource is too important to be left to the whims and profiteering of private markets.
The public interest in sewerage and water must come first, for public health reasons and because, quite apart from us, the whole ecosystem of this country depends on good management of the water environment. We have to get that management right. The water companies have that duty, under a regulatory system and a responsible Government. The Bill takes us a long way down that road, with Government recognising their responsibilities for the first time in many years. It has taken a Labour Government to do that.

Mr. Roger Gale: I want to talk about disconnection, which is covered in clauses 1 and 2; responsibility for domestic supply pipes, which is not in the Bill and should be; and sewerage, which, despite the fact that it is mentioned in the long title, is not referred to specifically in any of the clauses. I intend to quote from a letter sent to me by the Director General of Water Services, Ian Byatt, on 20 November; from the briefing paper from Ofwat's southern customer service committee, which has been sent to all southern Members; and from the Ofwat National Customer Council briefing paper, which I believe has been sent to all Members of Parliament.
I represent a constituency in which more than 30 per cent. of the population—double the national average—are over retirement age. In some areas of the constituency, the figure is as high as 60 per cent. I think that I can reasonably claim, after 15 years in the House, to have listened to many pleas for assistance from many elderly people, and to have a reasonably detailed knowledge of their circumstances and requirements. I take no pleasure in saying that I also represent the area of the south-east of England—the Isle of Thanet—with the highest level of deprivation by all social factors.
I am sure that several of my constituents have had their supplies disconnected in the past three or four years, but, despite the fact that, like most Members of Parliament, I hold a regular surgery and receive a vast amount of correspondence, I have not received a single letter in that time about unfair disconnection, or simply about disconnection. That suggests that, if any of my constituents' supplies have been disconnected, it has been for good reason. I have certainly not received any representation on the matter from an elderly person, but, over many years in the House, I have received many letters from elderly people complaining bitterly that they are paying and carrying the can—and the burden of debt—for people who do not pay their way.
The overwhelming majority of our citizens living on modest retirement incomes have been used, over many years of privation and hardship—including throughout the


war—to paying their way. They pay their bills first, before spending money on beer, cigarettes, satellite television or any other luxury, and they take a pride in doing so. They do not know any other way, and they resent the fact that there are other people who simply want a free ride. That is a subject on which I receive letters.
Clause 1 will actively encourage the non-payers not to pay. Disconnection was mentioned by the Minister, by my hon. Friend the Member for West Chelmsford (Mr. Burns) and by the hon. Member for Sheffield, Hillsborough (Helen Jackson). I concur entirely with the view that water is one of the essentials of life, that any modern household requires a supply of clean water and that, on health grounds, the removal of that supply is highly undesirable; but adducing the law relating to habitable properties is unrealistic. When we talk about habitable properties, we mean that a proper supply is not available in those properties: we are not talking about a short-term disconnection. Even the Minister will agree that the disconnections to which he and others referred have been short-term ones.

Helen Jackson: Will the hon. Gentleman give way?

Mr. Gale: I shall give way to the hon. Lady in a moment.
I do not know anybody who believes that a supply of clean water is not desirable, but I am worried that the Government's approach will encourage non-payers. Worse, it will create circumstances—as my hon. Friend the Member for West Chelmsford said—in which the water companies, instead of going to court and applying for a disconnection order which would last for a short time in almost every case, will seek permission to attach income or benefit, or to send the bailiffs in to seize property.
I can foresee circumstances in which the Minister will come under pressure in the House from hon. Members. They will say that one of their constituents is a tenant, and his landlord, who uses the address of the flat, has not paid the bill. The tenant, who pays a rent that embraces the water bill as part of the deal on a furnished property and knows nothing of the circumstances of the non-payment, suddenly finds the bailiffs at the door ready to seize his goods. What provision is the Minister making to ensure that that does not happen? We may face that problem in a few months if he does nothing.
The Minister has not come to grips with the advantages for domestic budgeting of pre-payment meters for those who have difficulty in paying water bills, although the hon. Member for Milton Keynes, North-East (Mr. White) touched on the issue when he intervened in the speech by the hon. Member for Hillsborough.
The principle behind pre-payment meters is accepted for the electricity supply. The electricity companies use such meters sensibly, cautiously and intelligently, in cases in which customers are known to have a history of non-payment or a difficulty in budgeting and paying, as some people do. The Bill will prevent that from happening in the supply of water.
The hon. Member for Hillsborough agreed with the hon. Member for Milton Keynes, North-East, and said that

it was an imaginative idea, but the Bill would prevent it. I believe that it would be sensible to go a stage further, and provide the pre-payment meter with a built-in cut-off point, as has happened in the past. They should give a warning signal followed by several days of supply, so that the customer knows that the money has run out, followed by—if necessary—disconnection. All the customer has to do is go down to the office, get the key recharged, and reconnect the supply. That involves no difficulty, and no legal intervention.
I raised the issue in my letter to the director general, and his reply, in a letter dated 20 November 1998, read:
The Government intends to ban disconnections, and the High Court has ruled that budget payment units are not lawful operated as they were with a disconnection facility. While I agree with you that disconnection is an effective last resort (and it must be used carefully with proper procedural safeguards)"—
I agree—
regulators must work within the law.
The Bill should address that problem. The water companies believed that such meters were a useful tool, and so did the director general of Ofwat. They have to work within the law, but we are in the process tonight of changing the law, and I cannot understand why the Minister will not permit it to be changed in that way.

Mr. Burden: The hon. Gentleman must be aware that there are many easy-payment aids to budgeting that do not involve disconnection. He believes that "can't pays" should not be disconnected, and that pre-payment meters should be allowed to have automatic disconnection facilities after a warning, but how does the unit know whether it is dealing with a "won't pay" a "can't budget" or a "can't pay" before it cuts the customer off?

Mr. Gale: The answer is that it does not know, in the same way that an electricity meter does not know, but I doubt that any Labour Member would say that pre-payment electricity meters are unfair. If the customer runs out of money, the house goes dark.
It is all very well saying the electricity supply is different from the water supply, but it could cause problems if elderly people's electricity were cut off on a night such as last night, and they have no fire. However, I have received no complaints about such a circumstance. Other hon. Members may have done so, and they may pray those cases in aid. I have not done so, and, I repeat, I represent a constituency with a high elderly population, whose interests I take a pride in seeking to represent.
I do not believe that the Bill is the right way forward, and nor does the Ofwat National Customer Council. I propose to place sections of its briefing paper—all hon. Members have received a copy—on the record. In its advice in the section on debt recovery and disconnection, the council states:
The Government wants water companies to rely exclusively on civil debt recovery procedures available through the courts. We believe that this may prove less effective and no less unpalatable than disconnection—in particular the use of civil debt recovery procedures will add to the customer's debt.
That may cause the problem that I mentioned earlier when bailiffs go in and seek to seize property belonging to someone who is not the householder.
The briefing paper continues:


The level of customer debt in the water industry will rise as more customers refuse to pay; the costs of debt recovery and unpaid water charges will be borne by other customers.
I emphasise that those are not my words, but those of the Ofwat National Customer Council. Once again, the payer will be asked to pay for the non-payer.
The briefing paper also states:
The DSS Direct Payments Scheme enables money to be passed directly from customers' benefit payments to water companies to help them budget to pay their water bills and avoid disconnection for non-payment of charges.
The Government has confirmed that the scheme will continue to operate when household disconnection is prohibited but has not said precisely how; more detailed assurances are required.
That is another flaw in the Bill, and the Government should pay much more attention to the section of the Bill referring to that issue.
I turn now to the issue of responsibility for domestic supply. The Bill is an excellent opportunity to address another problem of particular concern to my elderly constituents, and, I suspect, to those of other hon. Members. The Bill will give people the right to have a water meter installed. Elderly people will be led to believe that they will save money by doing so, because they are low users.
What will happen when the water company comes along to install a meter, and discovers—as is often the case in elderly properties that are not as well maintained as they should be, because the owner cannot afford it—that the pipe from the meter to the house is rotten and leaking? That is a real problem, because the pipe is the responsibility of the householder. Such householders are often elderly and on limited incomes, but the water company has a right to say, "We must renew that pipe, because it is leaking. The director general of Ofwat and the Government have told us that we must repair leaks. We are going to repair the pipe between the new meter and your stopcock, and we are going to charge you for it, because it is your responsibility."
The cost will depend on the length of the pipe involved and on what has to be dug up. The pipe may go under a conservatory or patio that someone installed without knowing that the pipe ran under it. The cost could be a minimum of £500, and, if it is a case of taking up a patio or conservatory floor, it could be £1,500 or £2,000. That enormous bill will suddenly land on the doormat of an elderly person who the day before had a water supply and no problems.
The Bill is an opportunity to deal with that problem once and for all. It is an opportunity to say—there is an element of rough justice in this, I concede—that the water company has a statutory duty to lay the pipe to the stopcock in the house if it requires repair.
That will mean two things. The company will incur a cost, which it will have to transfer, as it will not bear it alone, so everyone will pay a little more. Labour Members may say that that sounds like rank socialism—[Laughter.] In that case, they should support me, and help me to move an amendment to the Bill. In this instance, I would sooner everyone paid a pound or two more a year as an insurance policy. One day we will all benefit. I would sooner that happened than that some of my elderly constituents—plucked out non-selectively because they happen to have

applied for a water meter—found a bill for between £500 and £2,000 on their mat. I very much hope that the Minister for the Environment will take that matter on board.
I raised that matter with Ian Byatt, who told me:
Making water companies responsible for the customers' supply pipes would involve changing the law and is obviously a matter for Parliament.
We are Parliament, so let us change it. Let us do my elderly constituents and those in other constituencies some good.
Finally, the long title of the Bill mentions sewerage, but there is no mention of it in the Bill itself. I pay the Minister the warmest compliment that I can. On the very day of the summer recess, if I remember rightly, he courteously and quickly received me and a delegation of my constituents to discuss Foreness Point sewerage provision, for which I am deeply grateful, as are my constituents. Therefore, he is aware of the problem that I face in my constituency, but it is a broader problem.
In north Thanet, Southern Water wants to extend a sewage treatment plant. To do so, it requires the right to acquire land and dig up a site of special scientific interest and of natural beauty. We are told that the site will be reinstated when the job is done, in four or five, or perhaps even six or seven, years. In the meantime, my constituents will be subjected to considerable disturbance. However, when the job is done, we will still be pumping sewage into the sea, and, in this day and age, that is not acceptable.
The Bill does not deal with that problem, but makes it harder for the water companies to deal with it, which I find incomprehensible. I cannot understand why we and Ofwat are saying that the water companies have been efficient and have made large profits, so we should take those back and share them out among the customers. I want that money to be put into better services, so that we have fewer leaking pipes. Above all, I want it to go into modern, 21st-century treatment plants, which will satisfy the needs of our children and grandchildren.
If we are to bequeath a legacy through the Bill, surely it must be that it is incomprehensible that we should dig up fine land and, despite having a water shortage, pump sewage into the sea, rather than properly treating and recycling the usable effluent by putting it into rivers, allowing it to become diluted, and abstracting it lower down. However, neither I nor the Minister can tell Southern Water that we require it to install and pay for—at considerably greater expense—an inland treatment plant, if we are saying in the next breath that we will take away the money that the company could use to do it.
Kent is short of water. Tourism and light industries are developing, and, increasingly, Kent is becoming a dormitory for London, so it will need more water. Southern Water and Mid Kent Water will have to build a reservoir at Broad Oak or raise the banks at Bewl water to provide it. Where will they get the money to do so, if the House—through the regulator and legislation—denies them the means and resources?
The balance of the Bill is wrong. As my hon. Friend the Member for West Chelmsford said from the Conservative Front Bench, we will not oppose Second Reading, but we shall try to amend the Bill in Committee and on Report, and we will oppose it on Third Reading if we do not secure the undertakings, assurances and, in some cases, the improvements it needs.

Dr. Ashok Kumar: Thank you, Mr. Deputy Speaker, for allowing me to speak in this debate. First, I must congratulate my right hon. Friend the Minister for the Environment on the Bill. He has always been a champion of social justice; in the Bill, he clearly demonstrates that he is trying to eliminate injustice for consumers, and I congratulate him. Certainly, all Labour Members would agree with him.
The main thrust of the Bill is to lift the spectre of disconnection for ever. I would argue that the Government need to build on the period of stability that the Bill will provide for the water industry to consult on a truly lasting scheme for water charging, which incorporates environmental, social and investment needs.
Having listened to the debate, I think that we all agree that water is a basic requirement of human life. It is worth reminding the House that the basic need for a hygienic water supply and the need to combat illness and disease led to the setting up of local forms of government and administration. Since then, an unimpeded supply of water has become something that most people take for granted.
The affordability of water is a key issue, as is the need to ensure that no one is denied access to a water supply, whatever his or her needs. Some people have more needs than others. Large families, often headed by a single parent, obviously need more water for washing, bathing and cooking than small families. I take the point that, often, the largest users of water are affluent families who have—or feel that they have—large cars to wash and lawns to water, but we must not lose sight of the needs of the poorest among us. The key issue is the need to eliminate—

Mr. Woodward: By how much will the cost of supplying water to homes increase as a result of the cost of installing a large number of water meters? What about the effects of moving from charges based on rateable values to meters? If the final cost is more expensive water, will not those vulnerable people—not necessarily the people who would be cut off, but those at the bottom of the pile—have to pay larger bills?

Dr. Kumar: If the hon. Gentleman is patient, I will come to that point.
The key issue is the need to eliminate the spectre of disconnection. My area is served by Northumbrian Water and the number of disconnections there hardly registers—indeed, there have been none this year, despite the poverty and high unemployment from which many of the region's towns, cities and villages suffer. The arrangements that are in hand in our region are certainly a model for the rest of the country to follow and they comprise the following: the operation of a well-resourced customer services committee; proper collaborative arrangements with local councils and housing associations, which were mentioned by my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson); and on-going liaison with bodies such as consumer advice centres and citizens advice bureaux.
We recognise that some disconnections occur. Sometimes they are the result of "don't pays" rather than "can't pays", but even in the former case the actions of, say, obstructive husbands can blight the lives, and harm

the health of, wives and children. Despite everything, some "can't pays" slip through the net. My experience as a councillor, and my constituency case load, has taught me that people who are less able to communicate are prone to pulling the blanket over their heads and hoping that problems will go away; of course, they do not.
I appreciate the fear of water companies that merely removing the ability to disconnect will not solve their problem of recovering their costs and charges. The right to an uninterrupted supply of water comes with the responsibility of bearing a share of the cost of having it delivered through the tap. The Government should rule out some ideas now, such as devices that restrict the flow and amount of water delivered. That idea was floated by some water companies in the south of England.
I would like the Government to rule out pre-pay meters, which merely give rise to a problem that already exists in respect of electricity supply—self-disconnection, which often happens without anyone concerned for the well-being of a family being aware of it. I would like some examination of the possibility of pursuing payment through attachment of earnings or deduction from wages.
At present, in the income support regulations, rent, mortgages, gas and electricity rank above water in respect of direct payments. It could be argued that the system needs to be better fine-tuned to reflect the importance of the water supply. That could satisfy the needs of water companies to recover their costs and allow the fine-tuning necessary to reflect a household's financial circumstances. Such a process would stop the use of county court summons and judgments, which create additional costs for water companies and their consumers.
On the broader issue of the Bill's proposals on the charging system, paying for water affects low-income families more than the rest of us. The charges that they have to bear must be balanced against their other pressing needs for food, clothing and accommodation. That affects many in the north-east, where many people are workless and median wages are lower than they are elsewhere. The spatial and demographic reality in which Northumbrian Water operates means that many of its customers are poor and most of them are clustered in large conurbations such as Tyneside, Wearside and Teesside on the coast. Meeting environmental standards and servicing large centres of population mean that the capital cost of the utilities is high, and that has to be reflected in household bills. The Bill provides that the rateable value factor will remain a basis for charging after 2000, creating some stability for the industry and the regulator in judging the equity of household charges. However, everyone recognises that this is not a long-term position and that a new methodology will soon have to be devised to calculate the household charge. That gives the Government a window of opportunity to consider the matter on a far broader canvas.
There is a case for detailed examination of the elements that make up the factors in water charging: the environmental issues that flow from the present water supply infrastructure provision on the ground; the need to stop wastage and leaks caused by outdated piping and drainage; the need to consider the matter on a truly national basis to iron out the geographical and social inequalities that result from the boundaries of the present water companies; the costs that water companies pass on to their customers for running their central office services; the possible contribution that water companies receive


from their subsidiary operations, something of importance given that many of them have branched out into other activities, such as waste management and environmental consultancy, which can be highly profitable; and the need to balance the needs and demands of—and returns to—industries and institutional users against those of household consumers.
The Government should consider whether cross-subsidies exist, or could be induced, to benefit both consumers and local industry. A good example of that exists in my area, where Northumbrian Water has recently completed one of the biggest infrastructure projects in the UK water industry. It consists of a totally new pipeline system and sewage pellet plant which will serve Tyneside and Teesside. It will also process industrial effluent and discharges from local industry. Such provision helps local industry directly and the charges for it can both defray the massive capital cost and eventually help to lighten the cost burden on the household consumer.
There should also be an investigation into how to maximise the efficient use of water. As the National Consumer Council suggested, the process could begin with a simple scheme providing, for example, statements on household goods of how much water they consume. With appliances such as washing machines and electric kettles, there is a correlation between the use of water and the cost of electricity supply, and that approach could allow consumers to make domestic purchases that help both the environment and the household budget.
There is a responsibility on Government, too, to assess the impact of water charges on the social security budget and find how the social security system can best help the poorest with their water charges. A key need is to ensure that the regulator has a duty to examine the need of the poorest written into his or her job description.
There is room to build partnerships. There must be a partnership between Government and industry that gives the industry the stability, confidence and time to plan for the infrastructure and environmental improvements that everyone knows are necessary. There must be a partnership between the community and consumer champions. Partnership should mean that no one becomes ill or sick as a result of having water turned off at the tap. Such partnerships must have a key objective of ensuring that the water supply becomes a vital weapon in improving the quality of life of all our people—the objective originally set when the boards of works and local councils were established in the 1880s. On behalf of my constituents, I commend the Bill and wish it speedy progress through the House.

Mr. Tom Brake: I congratulate the Minister on being first out of the starting blocks with a new Bill in this Session. I will not seek to pour cold water on his achievement in securing pole position, as I am sure that the experience that he will acquire in taking it through the House will prove invaluable when more substantial environment Bills are brought forward.
The Liberal Democrats support some aspects of the Bill. We recognise that water is not a commodity to be traded, like petrol or steel, but a necessity. We applaud

the Government's intention to ban disconnections and prohibit water-limiting devices, matters on which we too have campaigned. I was surprised that the Conservative spokesman dwelt at such length if not on defending disconnections, at least on minimising their extent. His reasons became clearer when he confirmed that he would prefer to have his water switched off for two days than lose his television.
We do not believe that water companies require disconnection powers to ensure that "won't pays" pay their bills; attachments of earnings or benefits, or the bailiffs should suffice. After all, I hear no clamour from the Scottish water and sewerage authorities and local authorities for powers of disconnection. However, we do accept water companies' concerns about the difficulties that they encounter with the small number of "won't pays" who work the system. Therefore, I ask the Government to consider reviewing the process to allow action to be take more quickly in cases where people are clearly and deliberately avoiding paying their bills. We support the changes relating to the Water Industry Commissioner for Scotland, even if, according to a lawyer who has closely examined the relevant clauses, the drafting appears to have been somewhat hasty. We may choose to return to that point in Committee. Our support is limited to those clauses.
The issue of water tends to leave egg on faces. In 1989, the Tories privatised 10 water companies at an administrative cost of £143.5 million, but they undervalued the companies by £873 million—not a negligible sum. It looks as though the Minister for the Environment will also be left with yolk on his tie—it would be quite visible on the tie that he is wearing today—for the Bill contains many unsatisfactory clauses and there are many unsatisfactory omissions.
The Bill extends the use of rateable value indefinitely beyond 31 March 2000, yet most rateable values are 25 years old and even the most recent are at least eight years old, so that hardly constitutes a fair method of charging. In opposition, Labour proposed a better system of water charging, set out in the document to which I referred earlier, "Ending the Meter Mania", which was published in April 1997. It was written by the right hon. Member for Holborn and St. Pancras (Mr. Dobson), who at that time was the shadow environment spokesman, and is now Secretary of State for Health. I am pleased that the Minister for the Environment has not disowned that document, in which Labour proposed using council tax bands, saying that that method
provides the basis for a system of water charging that would be fair, reasonably simple and cheap to administer".
That is the system used in Scotland. As both the Labour party in its document and I accept, that system would need to be fine-tuned, perhaps with additional bands at either end of the scale, but it is a viable alternative to the use of outdated and therefore unfair rateable values. The use of that system should not be ruled out simply because there would be losers as well as winners, as I understood the Minister to say; that would be a strange way to legislate. A system based on council tax bands is one that the Liberal Democrats support and the Labour party used to support. We believe that the Government should set an early deadline for scrapping rateable values and replacing them with council tax bands.
The Bill allegedly provides for free meters, but there is no rejoicing in the streets about that proposal. The cost of those free meters is identified in the document not disowned by the Minister as being £4 billion. My local water company says of free meters:
The changes to metering will certainly encourage more people to have a meter. It's the one or two person households in high rateable value homes who will benefit. Charges to everyone else, including the vulnerable groups, will go up.
Hon. Members may be thinking, it is a water company, so it would say that, but what about the Consumers Association, whose briefing states:
We are concerned that the implications of this Bill are a policy of creeping metering"?
What of the Chartered Institute of Environmental Health, which says:
the theme behind the Bill is increasing metering"?
What of the British Medical Association, which says:
We are concerned that the customer choice will therefore be increasingly limited as the housing stock with water meters fitted increases",
and continues,
Water metering has been shown to lead to reductions in use that threaten individual and public health"?
A water expert who advised the Environment Sub-Committee on water conservation and supply said:
The Government has now agreed to a very expensive approach to charging households for water. It will progressively impose water metering on most households.
It is worth noting that two of the organisations that I have just mentioned were quoted in "Ending the Meter Mania" in support of Labour policy only 18 months ago.
The view held by diverse organisations is that the consumer choice on offer from Labour, to which the hon. Member for Sheffield, Hillsborough (Helen Jackson) referred, is all one way: people can either have a meter now or eventually be forced to have one. If anyone is in doubt that the Government's policy is one of "creeping metering", they should consider the 4.4 million—or perhaps 5 million; we await an announcement—new homes that are expected to be built by 2016, which will all have meters.
As well as many flawed clauses in the Bill, there are significant omissions. The Government could have taken the opportunity to smooth out regional disparities in water prices by setting up a water services trust. Such a trust would be paid for by a levy on company profits and would fund water projects of national importance and provide grants and interest-free loans for the installation of water-efficient devices. I believe that Labour Members and even Conservative Members would support that.
The Government, who say that they believe in the principle of the "polluter pays", have made no attempt to address the question of charges for highway drainage. Not many people know it, but all water company customers pay the cost of highway drainage charges in their water bills. The Bill also fails to address the issue of abstraction licences. I am aware that the Government are consulting on that issue, but the Bill represents a wasted opportunity for a Government who claim to have put the environment at the heart of their policies. The Bill should have referred to water abstraction licences and required that they be time limited.
The Bill's overwhelming weakness is its unquantified impact on the poorest section of the population. Sutton and East Surrey Water, which is my local water company, estimates that unmeasured bills could increase by 27 per cent. if 50,000 of its customers opted for meters. Hon. Members may doubt the company's word, so let me quote again from the Consumers Association briefing, which states:
We are concerned that the implication of this Bill is cross-subsidisation between measured and unmeasured users, meaning higher bills for unmetered consumers (due to the free meter policy)".
I can also refer to "Prospect for Prices", a document which states the belief that the Government's proposals on metering could add between 1.5 and 2.5 per cent. per annum to bills. That means higher bills for lower income households in lower rateable value properties, some of which may not be included in the groups listed by the Minister in his speech. Even if they were included in that list, they might not be able to afford the so-called average bill to which the Minister referred. The Government have at least recognised that critical defect and are apparently trying, in conjunction with Ofwat, to mitigate its effect; but it should have been addressed in the Bill, not as an afterthought.
The Bill has disappointed a wide range of organisations with an interest in water, whether water companies, pressure groups or health experts. It contains some welcome measures, but many flawed clauses, and there are some glaring omissions. The Bill extends obsolete rateable values; it does not end meter mania, but precipitates it; and it does not provide adequate protection for vulnerable groups. Despite all that, I shall observe the traditions of the House and not press the matter to a vote tonight, but I believe that the Bill will require extensive amendment in Committee.

Mr. Richard Burden: I have enjoyed the debate, as good points have been made by hon. Members on both side of the House. I was especially interested in the speech of the hon. Member for North Thanet (Mr. Gale). Although I profoundly disagree with his remarks about pre-payment meters, his comments on responsibility for the supply pipe deserve consideration. I hope that he will not follow through on his statement that the issue might affect the way he votes, but the question of who is responsible for the supply pipe on consumers' premises will have to be addressed at some stage.
I was joint secretary of the all-party water group in the last Parliament and I welcome the fact that many of the measures that we argued for are in the Bill. My hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson), who spoke earlier, mentioned her Bill to ban water disconnections. I pay tribute to her and the work that she has done on that issue over the years. I tabled a private Member's Bill, the Water Conservation and Consumer Choice Bill, which not only called for a more systematic approach to water conservation and leakage, but sought to allow the consumer to choose whether to have a meter, rather than leaving the matter entirely in the hands of the water company or the water company and Ofwat. I welcome the fact that that issue is addressed in the Bill.
This Government have had a real impact on the water industry. Shortly after we came to office, the water summit agreed a 10-point plan which signalled real improvements in water leakage prevention in the first two years. I also pay tribute to the progress made by the water companies. Many of those who know me may consider that quite surprising, as I spent much of my time in the last Parliament—and before I came to this place—criticising the water companies, the process leading to privatisation and many of the attitudes that followed it.
Following privatisation, the water companies seemed to adopt a gung-ho approach in their search for ever-increasing profits and dividends. Water prices increased by a third in real terms and any increases in quality did not match the increases in price. The disconnection option was used too readily, with a threefold increase in the number of disconnections in the year following privatisation. I got the feeling, in the immediate post-privatisation era, that the water companies' desire to underline the fact that they were now part of the private sector was leading to a loss of the public service ethos that is so important in the water industry. The water companies became disconnected from the communities that they served, and I believe that that attitude has caused many of their subsequent problems.
I am pleased to say that, since then, the water companies—including Severn Trent in my area—have shown a new sensitivity and a greater willingness to listen to criticism. Before privatisation, the then chairman of Severn Trent, John Bellak, was described as having the courage of the previous Government's convictions. The company was very political in the way that it managed its affairs. I welcome the fact that the situation has now changed. The company is doing important environmental work and supporting our region. It is backing the Millennium Point project, which is so important for the entire west midlands area, as well as regeneration projects such as the West Midlands First campaign, which is designed to promote the area as a centre for manufacturing. Those projects are vital in reconnecting the water industry and water companies with the communities that they serve.
I welcome the quality improvements that have been made and I am also pleased about the dramatic change in the water companies' attitudes towards people who have difficulty paying their bills. The disconnection rate is down significantly. Severn Trent is one of the companies that have established a charitable trust to help those customers who have difficulty with bill payments. We must give credit where it is due: it is important to recognise that changes have occurred.
However, do we assume from those changes that there is no need to worry about and outlaw disconnections? I think that that would be the wrong response. Disconnection is a matter of principle. The British Medical Association, the Royal College of Nursing and the Chartered Institute of Environmental Health have made powerful cases—many of which have been mentioned tonight—outlining the real public health risks involved with disconnection. Those risks involve not just the householder or the person who, for whatever reason, has not paid his or her bill, but entire families, including elderly relatives and children. Many people may suffer health risks as a result of disconnection. Allowing the

disconnection of water supplies as a result of non-payment is no more acceptable or logical than responding to the non-payment of local taxes, such as council tax, by allowing rubbish to accumulate outside people's doors and removing their children from local schools. We are talking about a public service and the disconnection issue must be considered in that context.
Despite the changed attitudes of many water companies, they can still take a cavalier view of disconnection, especially in the short term. That was certainly the case in the debate that occurred prior to the High Court judgment regarding pre-payment meters, and I believe that a similar opinion crept into the speech of the hon. Member for North Thanet. We have been told that pre-payment meters are essentially a budgetary measure and that there is a consensus that no one should be cut off for non-payment of bills. However, the pre-payment meters introduced by Severn Trent and other water companies—which were said to be a budgeting aid designed to help people who had difficulty paying their bills—led to disconnections, which were later deemed to be illegal.
Although I welcome and support the initiatives taken by water companies and those promoted by my right hon. Friend the Minister for the Environment—including easy payment schemes, staged payments and electronic payments at post offices and so on—any device that is said to be a budgetary aid but is used to threaten people with disconnection or a restricted water flow is not acceptable, for the same reasons that formal disconnection is not acceptable.
If we are to outlaw disconnections—and I believe that we should—we have an obligation to ensure that there are other remedies in place in the event of a wilful refusal to pay. We owe it to our customers to ensure that they do not bear the brunt of bills arising from non-payment. It is vital to ensure that the court system works effectively and that garnishee orders and measures such as attachment of earnings work effectively.
I welcome the Bill's extension of the time limit on using rateable values as the basis of water charging. Finding the best and fairest system of charging for water is a complicated issue. We must balance equity for customers with some consideration of ability to pay. We must also bear in mind sustainability and promote the conservation of water as a vital resource. It is not easy to find the ideal system that meets all those tests—in fact, there is no consensus in this country about what that system should be.
In the past, there has been a headlong rush in some quarters towards metering as a panacea to those problems. When I sat on the Opposition Benches in the last Parliament, I had no doubt that the former Secretary of State, the right hon. Member for Suffolk, Coastal (Mr. Gummer), preferred metering as the norm for water charging—he made that absolutely clear in this Chamber and in meetings with my hon. Friend the Member for Hillsborough and with me.

Mr. Brake: Does the hon. Gentleman concur with the view of the Consumers Association that the Government's current policy is one of creeping metering?

Mr. Burden: The matter is not as simple as that. I shall deal later with the impact of metering on other aspects—an issue raised by the hon. Gentleman and others—but I do not agree with his analysis of creeping water metering.
There are powerful arguments against using metering as the norm and as the basis of a water charging system. Some years ago the Save the Children Fund conducted a study of the effect of metering on low-income families. Companies and many water analysts have drawn attention to the huge capital cost involved in making metering the norm—some estimates have put it at about £3 billion. Various hon. Members have pointed out at various times that many of the costs of the water industry are not specifically related to volume. In some cases, it has been estimated that 60 per cent. of the costs of the water industry are not related to volume.
There are problems in seeing metering as the panacea for the future, but there is no consensus about what the alternative should be. That is why I believe that, at this stage, extending the use of rateable values to buy us time to reach a consensus is a responsible way of proceeding. It should be made clear to consumers that there is no obligation on them to have or not to have a meter. Of course there would have to be exceptions, some of which are covered in the Bill, but the principle is sound.
I have some concerns about where we go from here. First, the Bill raises the question whether customers should have the right to have a meter installed free. I have no problem with the suggestion that customers who want a meter should not be charged at the time of installation. However, nothing is free in the water industry; there is a knock-on cost. I have heard it said, sometimes by supporters of metering, that in the water charging system there is an excessive bias towards the unmeasured customer. Having examined the system, I do not agree that that is the case, but I would be worried if, as a consequence of the Bill, a customer's right to have a meter free resulted in the cost of the meter being borne only by the unmetered customer, through the tariff basket.
The Government probably intend a balance to be achieved, rather than the entire cost falling on the unmeasured customer, but I hope that my right hon. Friend the Minister can clear that up tonight or in Committee. It is unlikely that there is any difference in principle on that, but some of the more gung-ho supporters of metering in various institutions that have some influence on the matter may interpret it in that restricted way.
My second concern is where we go in future. The Bill is the right way of proceeding now, in the absence of a consensus on charging systems for the future. However, we must reach a consensus sooner or later on what the basis of charging for water should be. If metering for domestic use is promoted through publicity or through incentives such as free installation, those who will save money by having a meter installed will, entirely reasonably, opt to have a meter installed. The water companies have admitted that many of those will be households in properties with a higher rateable value. If those customers save money as a result of having a meter installed, it is likely that the water company will seek to recoup the cost elsewhere.
If the cost is recovered entirely from the unmeasured customer, the tariff basket will begin to be skewed. Unlike the hon. Member for Carshalton and Wallington (Mr. Brake), I do not believe that that will inevitably lead to creeping metering, but as a society we must decide on the norm for charging for water in the future.

Mr. Oliver Letwin: I have been listening to the hon. Gentleman's thoughtful speech with

considerable interest. Does he believe that if all the categories of metered water customers are added together—those who apply for the free meter who are low-use customers and will therefore benefit and keep the meter, those who are high-use customers who use their sprinklers in summer and will be forced to take meters, those who buy houses that do not have rateable values, and those who buy houses in which a meter has been installed more than 12 months previously—there will be a vast increase in the proportion of metering, on a cumulative basis?

Mr. Burden: The hon. Gentleman is right to say that there will be an increase. My right hon. Friend said that the chances are that there will be an increase. We shall have to wait and see whether it will be vast. Already about 14 per cent. of households have a meter. If there is an incentive such as free installation, the chances are that more households will have meters. If those customers save money on their bills as a result, there will be some kind of knock-on.
The conclusion that I draw is that, in the absence of a consensus, it would be ridiculous to go headlong into trying to invent rateable values for all houses, whether they were built recently or not, or to go headlong for council tax charging, irrespective of the impact that that could have on low-income families if it were introduced without restructuring the council tax bands, or to go headlong for metering. A precipitate move down any of those roads would be wrong. That is why the Bill is right. We must be creative and examine different charging systems in different regions. We must accept that the objective is to develop a consensus that does not yet exist among Government or Opposition Members.
As I have made clear for many years, my preference is for an unmeasured system to be the basis of charging. The capital cost of metering is so high that that is not the most attractive basis for charging for water in the future. Through an unmeasured system it is possible to create a charging system more closely related to ability to pay, but it is not a simple equation.
There are powerful environmental arguments for metering. I have suggested that, as an alternative to metering, we should do more about leakage, and I have welcomed the efforts made so far by my right hon. and hon. Friends to deal with leakage. However, it was suggested to me last weekend that, if we move too far down the road of leakage control, that would involve an environmental cost in terms of landscape and so on. It is not a simple situation, but we must tackle it.
If, after discussion and debate, we decide that we want metering to play a substantial role in our water charging systems, we must be far more rigorous in finding ways of relating a metered system to the ability to pay. The initiatives in the Bill to protect vulnerable groups are welcome and long overdue. That could have been done by the previous Government, but was not.
To say that water charging should be based on average usage is a start, but average usage is not the same thing as ability to pay. We should commission research and try to find ways of relating a metered system not just to concepts of average usage, but to ability to pay. Only in that way will we be able to protect low-income customers effectively.
I welcome the Bill. It is precisely what we should be doing at this stage, in the absence of a national consensus. It contains important initiatives, from the extension of


rateable value to the protection of vulnerable groups. I am particularly pleased that we finally say what a civilised society should say: that domestic water disconnections should have no place in the water industry.
I hope that, after we have passed the Bill, we will move on and have a national debate to develop a consensus on a water charging system for the future. It should be based on ability to pay and ensure equity between customers—and it should promote sustainability and conservation, because water is an important and precious resource.

Mr. Shaun Woodward: The hon. Member for Birmingham, Northfield (Mr. Burden) has put his finger on it. What is wrong with the Bill is that there is no consensus in the industry about whether this is the right way to proceed, and there is no consensus among those worried about vulnerable groups. The genuinely vulnerable are not the 640 who have been disconnected, but those who will pay more for their water as a result of the Bill.
The Bill is not particularly bad—its motives are good—but it is not a good Bill. It should have provided guidance for the water industry on how to charge for water in the years ahead. Instead, it has prolonged the uncertainty of the present system and failed to address many of the crucial issues, such as the environmental impact of the use of water.
As my hon. Friend the Member for West Chelmsford (Mr. Burns) said, the Bill does nothing to enhance competition within the industry, which is the most effective way to drive down the cost of water. It has little impact on the environment, provides little guidance for the long term and creates greater uncertainty. It is against that background of uncertainty that we must consider the Bill.
We have heard the rhetoric of Labour Members—they have expended much energy talking about what the Bill will do for the vulnerable and how it will protect people from being disconnected. However, the truly vulnerable are no longer being disconnected. In the past few years, there has been a decline in the number of people who have been disconnected. We must put the number of disconnections in context, and consider whether the Bill has been thought through, has logic and relates to some of the other essential utilities, such as electricity and gas.
We have no idea whether the system of rateable values will continue in the long term. The Bill does not say whether it will continue until 2005 or 2010. Without a final date for changing the system, there is no incentive for the industry, the Government or the regulator to find an acceptable, fair and modern method of delivering water to the consumer. Without that long-term solution, everyone is left with uncertainty.
The water industry will bear the cost of providing the meters. It may spend hundreds of millions of pounds for no purpose, because, in a few years' time, the Minister could present a new Bill that changed the system of charging. The water industry has spent several hundred million pounds on disconnections. If all those 640 people who have been disconnected this year for whatever reason were highly vulnerable—most of them were not—they could have done with the money that will be wasted by the industry.
It is crucial to separate the principles of charging and of disconnection. The Bill is required to sort out the long-term interests of water for the consumer and for the industry. However, we must be careful to put disconnections in context. The Bill puts into legislation what the industry already does very well voluntarily. The number of disconnections last year was one tenth the number in the last year of nationalised ownership of the water industry. Public ownership is not a guarantee that people will not be disconnected. Labour opposed privatisation, but few people are now disconnected, because in the private sector the industry has listened to important criticisms that have rightly been made about vulnerable people needing to be protected. It has responded to those criticisms: it has not always got it right but, by and large, the trend is down, and this year the number of disconnections is in three figures.
It is worth noting that, of those disconnections, two thirds are reconnected within 48 hours. I accept that those 48 hours may be miserable, but I am not sure that the Bill approaches the problem in the right way. The industry is concerned about the effect of the Bill on the cost of water, and on customer debt. It believes that customer debt will rise sharply, because the burden will be placed on the customers who pay their bills. We will end up with a water tax as well.
The downward trend in disconnections should have given the Government a better sense of how to proceed other than by legislation. The Minister said that the Bill will help millions of people. I am not sure who those millions of people are. We know that 640 people were disconnected because they did not pay their bills, but who are the millions who will be helped?

Mr. Lawrie Quinn: You have several times referred to those 640 people. It is my understanding that you are—

Mr. Deputy Speaker (Mr. Michael Lord): Order. The hon. Gentleman must use the correct parliamentary language. He must remember that he should address the Chair.

Mr. Quinn: I apologise, Mr. Deputy Speaker. Should not the hon. Gentleman refer to 640 households rather than to 640 people? Does he not diminish the problem by that reference?

Mr. Woodward: The hon. Gentleman makes a fair point, and I do not want to quibble about whether the figure represents individuals or households, some of which may have one or two people. We are comparing like with like, so if there were 15,000 disconnections 10 years ago and the number for April to September this year is 640, those are the two figures that we should compare. If the hon. Gentleman wants to double this year's figure to 1,200, we should double the figure for 10 years ago to 30,000 to make a comparison. I am not sure that the hon. Gentleman's point is firmly made.
Who are the millions of people who will be helped by the Bill? It will certainly not be the millions who will have to pay more for their water. The Bill will fall heaviest on the people at the bottom of the pile—the honest people with little spare cash who pay their bills because they believe that that is the right thing to do. It would be interesting if the Minister were to tell us who those millions of people are.
Does the Minister believe that more or fewer people will refuse to pay as a result of the Bill? The number of people who refuse to pay their bills is declining. Will the Bill lead to a further decline, or will the number increase? If the Minister believes that it will increase, does he also accept that, if more people refuse to pay their bills, there will be more court work and more bureaucracy? One of the dangers of the Bill is that it will lead to more expensive water, more court work and more bureaucracy, yet not one drop of water will be delivered more efficiently.
The Bill does not address the problems of improvement in the service and of leakages. Those issues worry consumers of water. The Bill fails to deal with crucial matters that we know consumers care about.
My hon. Friend the Member for West Chelmsford rightly asked the Minister whether a business impact assessment had been made of the effects of the Bill on water companies. Everyone must fear that the cost of forcing companies to supply free meters will be enormous. One water company in my constituency, Hyder, estimates that the cost of providing meters for a company with more than 1 million customers would result in an increase of about £25 a year in the average water bill.
When Labour was in opposition, it made much of its claim that it would take £50 from the average water bill of every consumer in the country. All that the Water Industry Bill will do is increase the bill of every consumer. Nothing in the legislation suggests that Labour will honour the commitment that it made to consumers to reduce their bills; but there is everything to suggest that it will bring about more bureaucracy in the industry, and will do nothing to address the problems of leakage, nothing to improve the service and nothing to force the price of water down. It appears that it will merely force the price of water up.
Hon. Members have made many other points about the impact of the Bill, and I feel that it is incumbent on the Government to deal with many of them, particularly in Committee. I feel, as do my constituents, that the Bill is fundamentally inadequate. It has missed the point. It dresses up, in the clothes of a claim to be here to help the vulnerable, a series of clauses that will not help the truly vulnerable: clauses that may lead to more expensive water for all such people, and that will do very little to lessen the environmental problems that have been mentioned.
This is not a very good Bill, but it could be improved considerably in Committee. I have no doubt that many questions remain to be answered then.

Mr. Lawrie Quinn: I speak on behalf of my constituents. Earlier speakers said that they had received no correspondence from their constituents about this vital matter, but, as I can prove, I have received many letters, especially about the equity of the current system.
I especially wish to mention a public house in Staithes, in my constituency, called the Captain Cook inn. It is a business, but, for rating purposes, it is also a domestic establishment. The landlord, Mr. Scott—who is also a ratepayer—has made many attempts to secure equity in terms of water use. The simple reason for his problem is that he has his own natural spring. He claims that he takes

water from it, and he feels that Yorkshire Water is charging him unfairly for the water that he uses. Earlier, the hon. Member for Carshalton and Wallington (Mr. Brake)—the Liberal Democrats' spokesman—referred to abstraction licences. I hope that the Committee will consider that issue, which is particularly important to areas such as my constituency, where many people abstract their own water.
I commend the improvements made by my local water company as a result of the marketplace—as a result of the change in the culture. Given that I am talking about Yorkshire Water, many hon. Members may be surprised by the progress that has been made. As will be recalled, not so long ago there were drought problems, but—as, I believe, with Severn Trent—many changes have been made to the management ethos and the culture in the company. I commend Kevin Bond, who was managing director of Yorkshire Water, for the changes that he brought about.
Being on the coast, those living in Scarborough and Whitby are obviously concerned about the disposal of foul water—sewage. Again, I commend Yorkshire Water for the vast amount that it is investing in Yorkshire coast care. I do not think that would have happened without a change of ethos and emphasis that led to connecting with the community.
I believe that my water company has listened to my constituents, and that, in its responses to consultation that pre-dated the Bill, it recognised problems that are experienced in a very remote area. I also believe that we are right to implement key manifesto commitments made by many Labour Members, including me, in the run-up to the general election. Those to whom I spoke on the doorstep wanted us to make progress. I think that the Bill makes the progress that my constituents want, and I hope that, in Committee, we shall be able to deal with some of the technical detail that should be dealt with then.

Mr. Cynog Dafis: I welcome some of the provisions in the Bill. I agree strongly with what the hon. Member for Carshalton and Wallington (Mr. Brake) said about the increase in metering and about council tax banding, but I shall say more about that later.
My main objection to the Bill is that, yet again, a key policy measure bundles Wales and England together in an entirely inappropriate way—in this instance, an especially inappropriate way. Things will be different for Scotland, although I understand the insistence of the Scottish National party that the issues in the Bill ought to be left to the Scottish Parliament. That, in effect, is what I shall say about the Welsh Assembly.
There is, of course, a reference to Wales in clause 14 of the Bill, which mentions the possibility of transferring functions from the Secretary of State to the Assembly. The sooner the better, I would say. It strikes me as essential that Wales should be free to devise its own policies, within the framework of a sustainable water strategy—a strategy that should exist within the wider framework of a sustainable development strategy, which, under the Government of Wales Act 1998, the Assembly is obliged to draw up. The Assembly should, of course, have the function of constructing such a sustainable development strategy for Wales.
I admit that it is not clear to me how much discussion the Bill will allow the Assembly in regard to the drawing up of a strategy, and I should be grateful if the Minister


would elaborate. I do not suggest that Wales should be allowed to do what it likes, regardless of the ecological effect; no country should be allowed to do that. Wales, and the Assembly, will have to work within the framework of international agreements in respect of water conservation, biodiversity and so on.
It is well understood that water will become an increasingly important consideration in environmental sustainability during the next century, but, within that framework, Wales should have maximum autonomy and the power to develop and conserve its water resources as a vital environmental and economic asset, for that is what water is. I need not tell the House that water is a sensitive issue in Wales. In recent decades—or at least within my lifetime—we have seen the destruction of Welsh communities to enable the building of reservoirs for supplies to English cities. That has been enormously controversial, and has had profound political consequences for Wales.
We need distinct policies in Wales for practical reasons. In the first place, Wales has a plentiful water supply. To give just one example, between 1989 and 1998, there were eight years of below average rainfall and three of those were years of serious drought, but, in the area of Welsh Water, during that whole time, there where no hosepipe bans and no drought orders. The Environment Agency says that there are no low-flow rivers in Wales, so we have a water-rich environment.
In those circumstances, the argument for encouraging metering, which seems to be what the Government's policy is about—they view it as something that should be spread far and wide—to impose discipline on consumers is much weaker, but it will be advanced. As long as owners of new homes have no other choice, there will be a shift, or a slide, towards metering. We need to allow owners of new homes to choose not to have meters. That provision should be in the Bill.
We need to move as quickly as possible to an alternative method and we have had some debate on that. I do not want to say much more about it, except to mention that the bills of 91 per cent. of Dwr Cymru—Welsh Water—customers are calculated according to rateable values that were last assessed in 1973. As has already been said, support for the council tax banding method is wide. There is much to be said in favour of moving towards that soon. The point is that that decision should be taken by the National Assembly for Wales.
There are likely to be different investment priorities in Wales. Where there is a plentiful water supply, the problem of leakage may not have such a high priority. It is expensive to correct and, in Wales, it might be preferable—it would be preferable—to invest in higher-quality sewage treatment. We have such a programme in Wales through the green seas project. Priorities for investment should be decided by the Assembly and by the Environment Agency in Wales, in consultation with Dwr Cymru, and local authorities and others who have an interest in the matter.
I suppose that some people might argue that we need to reduce consumption in Wales as much as possible, so that we are better able to export water over the border, but it might be decided that we had better not say that too loudly. That brings me to the important issue of water transfers, particularly in the context of climate change.
Climate change in the United Kingdom, as elsewhere, if it is going to happen—I believe that it is on the cards—will by and large increase demand for water, while reducing supply. That will cause significant problems for certain areas of the UK, particularly the south-east of England, but not just the south-east.
Projections by the National Rivers Authority in 1994 gave figures for deficits in the water supply in 2021 under scenarios of high and low growth in demand. More recent information on climate change will probably make those figures even more daunting. According to those figures, the Thames region will have a projected deficit, even under conditions of low-demand growth. In a high-growth scenario, that was also true of the Severn Trent, Anglian and Wessex regions. Wales would have a surplus, even in a high-growth scenario.
In those circumstances, it is clear that there will be pressures to transfer water from Wales to parts of England—not just from Wales; perhaps from some northern regions of England as well—through impounding, the construction of reservoirs or simply transferring water from river to river through pumping schemes and such methods. It is important to say that that would be unacceptable because transferring water has biological, ecological and political consequences.
I make it clear that the days when Wales could be used as a convenient source of primary products for export—whether minerals, timber, agricultural products or water—must and will come to an end. The sensible thing, and what is in Wales's national self-interest, is not to move water to enable increased development elsewhere, whether we are talking about industry or housing, but to move the development to where the resource exists. In this case, it is water, but, increasingly, that will also mean energy. Energy will be generated on a dispersed basis and development will migrate towards places where the sustainable energy system exists.
To give just one example, it is probably better to grow vegetables and other such food products where there is adequate water supply, rather than to transfer water to provide large-scale irrigation to grow them in an arid part of south-east of England. Climate change projections show that parts of south-east England will become arid in 20 or 25 years. Other industries besides those, of course, need a lot of water. The priority for Wales, then, must be not to export water, even if we have a fair price for it—that has been the theme—but to add value to water while conserving it and the ecology that it supports.
That has significant economic and, over time, political implications for Wales and perhaps for the UK too, but it is important to recognise that we are not just talking about self-interest. It is better in every sense to do what I suggest. It is environmentally more benign and it would contribute to creating a more dispersed pattern of economic activity and prosperity. It would help to counteract the unhealthy concentration of everything, whether wealth, power, population or activity of all sorts, in the south-east of England.
The National Assembly for Wales will, therefore, need to develop a sustainable water strategy for Wales as an early priority, building on work that has already been done with the Environment Agency in Wales and Dwr Cymru. However, another early priority must be to transfer to the Assembly all the powers that it needs to fulfil that mission properly.

Mr. Bob Blizzard: As many hon. Members have said, water is one of the essentials of life. However, if one needs a reminder of how much we rely on a modern system of supply of that valuable commodity, one has only to visit a third-world country such as Nigeria, which I visited in September. One can see how great a part of the lives of millions of people in such countries is spent simply carrying water from the well or standpipe to the home, and all the consequences that that has not only for public health, but for the whole way in which those societies operate.
It is a measure of the failure of the previous Government, who devoted so much time to water with their water privatisation programme, that the Bill is necessary very early on in the Parliament to sort out the wholly unsatisfactory laws on charging. When water was privatised, many people questioned the ethics of making a profit out of that which falls freely on to the earth. The answer that was always given was that the profit would be made out of not the water, but the treatment and means of supply; yet, under the laws passed by the previous Government, the water companies are allowed to deprive people of water—the means of life—for non-payment. That reveals the previous Government's attitude towards and motivation for the privatisation programme: primarily, it was not public interest, but the furtherance of private profit.
The Government's pre-payment policies, and the Bill, aim to ensure the reverse—that privatised water companies serve the public interest. The Bill will therefore not allow disconnection of water to homes, schools and hospitals. Although no one is condoning non-payment, there clearly is no need to deprive someone of water—or air—as punishment for non-payment of bills. As hon. Members have already said—although I shall take the example further—one does not deprive someone of access to the national health service because he or she has not met an income tax demand. We have to learn the lessons of the past, and realise that the great advances in health in the United Kingdom were made by improving factors such as the water supply.
There are, as hon. Members have said, many other ways in which water companies can ensure that people pay their bills. I was pleased to hear that the Opposition spokesman, the hon. Member for West Chelmsford (Mr. Burns), thought that the Bill would provide a more effective means of ensuring that people paid their water bills.
Other provisions in the previous Government's legislation show equal disregard for consumers and citizens by permitting water companies to compel conversion to metering. Moreover, current legislation provides no right for customers to choose whether to use metering or to continue with the unmeasured system. Currently, water companies are also not obliged to supply free meters. The Bill will redress all those problems, and give rights to citizens and customers rather than to water companies.
As hon. Members have already said in this debate, in many cases, the Government are bringing the law into line with water companies' practices. We should always remember that many water companies tried to introduce pre-payment devices that were self-disconnecting. I was pleased that the council that I led played an important part

in a campaign against the introduction of such devices. It is, therefore, simply unrealistic to say that everything will be all right if we leave the law as it is.

Mrs. Rosemary McKenna: Does my hon. Friend agree that the situation, and legislation, in Scotland is completely different from that in the rest of the United Kingdom largely because of the campaigns waged in Scotland, especially the referendum conducted by Labour in the Strathclyde region—against the advice given by all quarters—showing that more than 90 per cent. of the population completely disagreed with water company privatisation?

Mr. Blizzard: My hon. Friend makes a very valuable point. Labour-controlled local authorities across the country, both north and south of the border, helped to resist some of the previous Government's worst proposals.

Mr. Burns: Such as?

Mr. Blizzard: I shall deal with another example shortly.
The Conservatives left us with another problem. Under their legislation, after 31 March 2000, it will no longer be possible to charge by rateable value. As I said earlier, I think that that date reveals the previous Government's agenda: to have everyone on a meter by that date. The previous Government made no move to introduce an alternative, and their excuse—that they ran out of time in which to do so—is untenable. As we all know, the legislative programme in the previous Government's final Session was very light. If they really wanted to do something about the matter, there was ample legislative time—in a Parliament that went on and on—to do so.
Public opinion knocked off course the previous Government's plans for universal water metering. We have been left instead with a situation that I shall describe as a parallel to the millennium bug—which we could call the millennium tap or millennium water pipe. If the Bill is not passed, we shall be left with the strange situation of having to convert everyone to a water meter very quickly, or to discover some other device to ensure that the law passed by the previous Government is upheld.
The Bill leaves open the option of a future charging system based on council tax. It will be interesting to see what happens. However, such a system would require reform of the council tax system and the introduction of more bands, so that there were not too many rich winners and too many poor losers—which is really a verdict on the current council tax structure. The Bill will also give tenants, not landlords the right to decide whether a meter will be installed in a home.
Current arrangements pose a problem particularly for local councils, such as mine, that want to be fair to their tenants. Requests for water meters are sometimes made by single, often elderly people—or by an elderly couple—living in a full-sized family home. Such requests cause councils a serious problem. If councils want to meet the needs of that person or couple, they will say, "Fine; install the meter." But what about the interests of tenants—perhaps a family on a low income—who move in after the elderly person or couple leave it?
My council introduced a policy prohibiting water meter installations in full-sized family properties occupied by a single elderly person. That was a very difficult decision to make, as it was not possible to balance the interests of the current tenant and of future tenants. Thankfully, the Bill will sort out the problem.

Mr. Burns: How?

Mr. Blizzard: The current tenant will be able to choose a meter, whereas future tenants in real need—who have medical needs or form a large family on low income—will be able to gain the Government help provided in the Bill.

Mr. Burns: I have been following the hon. Gentleman's fantasy philosophy with growing amazement. He has managed, on a very narrow basis, to pick out an example that fits his rather chronic argument. How will the Bill help the average family who may go into that large home and who have no medical problems?

Mr. Blizzard: I am talking not about average families, but about large families on a low income. Such families are disadvantaged by meters. The average family is not particularly disadvantaged by meters. The Bill deals with those who are seriously disadvantaged.
We should realise that metering has a valuable part to play in encouraging responsible water use and the management of—I was going to say of a scarce resource, which it was until this summer—a resource that is not unlimited. In the right culture, such practices will help to avoid waste and provide extremely useful tools. However, I am concerned about whether our water companies have the right culture.
I remember an Environmental Audit Committee sitting in which we were considering whether to hold a major inquiry on water services. The managing director of Severn Trent Water company—who was also chairman of Water UK, the water companies association—made a statement to us which greatly concerned me. He said:
We do not believe that we should discourage people from using water in their gardens if they want to pay for it. If they use a sprinkler they have a meter … I have to listen to the arguments of my customers who say that if they have invested £25 in a plant because the climate will now sustain more exotic plants they are going to water it anyway. I have to listen to that because they are telling me what they intend to do with my product.
We have to remember that social equity is one of the principles of sustainability. It is unacceptable to allow people to consume huge amounts of water in using a sprinkler on an exotic plant or in filling up a swimming pool time after time just because they can pay for it, while asking ordinary people to be careful with water.
There is a lesson there for anyone who advocates heavy and crude environmental taxes. For example, if the fuel escalator, which was introduced by the previous Government, continues in a crude form, it may result in a rich person driving a car around while an ordinary person is restricted. We have to grapple with that principle.
To conserve the environment and to conserve water should mean sharing any curbs on our life style and sharing our inconveniences. Those who can afford to pay

should not carry on with the old, unsustainable life style while those who cannot carry a burden. We need balance. The Bill takes us a long way towards achieving that in respect of water, which is why I support it.

Mrs. Teresa Gorman: As my hon. Friend the Member for Witney (Mr. Woodward) said, it is hard to understand why we need the Bill. As I read the briefing material from the industry, it welcomes almost all the proposals. It is obvious that the great majority of the Bill's objectives could easily have been achieved by negotiation between the Government and the industry, which is naturally anxious to have good relations with the Government and with consumers. It is monitored by a number of bodies, including the Office of Water Services, which are directly answerable to the Government.
Conservative Members wonder why we are taking up time to introduce the Bill. The answer was given us by the hon. Member for Sheffield, Hillsborough (Helen Jackson), who told us of the fun that Labour had condemning the water industry, and what she described as its fat cats, in the run-up to the election. She painted a picture of an industry that had been privatised by the Conservative Government and was exploiting its customers and cutting off water supplies, and a picture of hysteria, which she freely admitted assisted Labour in winning the election.
In a way, the Bill has arisen out of that hysteria. It is part of the Labour party's policy of suggesting to the public that the services that have been passed to the private sector—and which are almost universally admitted to be a success, because they have led to lower charges—are still a problem and that the water industry represents that problem.
The Minister for the Environment painted a picture of what he called vulnerable types who needed the protection of our benevolent Government. Despite its being pointed out to him that Ofwat has defined the criteria on which people may or may not be disconnected; despite the fact that that is backed up by a number of regional customer service commissions, which monitor all proposals for disconnection before they are allowed to go ahead; and despite Ofwat's statement that the disconnections are not of vulnerable people, but are valid—that is backed up by the fact that two thirds of people who are disconnected are reconnected by the simple device of paying the bill within 24 hours of the disconnection—he persisted in painting such a picture, as if half the households of this country were having their water supply disconnected.
There are 20 million households in this country; about 640 had short-term disconnection for wilful refusal to pay for the water that they had consumed. There is no acknowledgement of the fact that someone else has to pay the bill when people behave badly, and try it on and push authorities to the limit. Labour Members never mention all those respectable people on modest incomes who pay their way and pay their bills. As Ofwat has pointed out, people who are bad managers can get the Department of Social Security direct payments scheme to help them to meet their water bills by passing amounts from their benefit payments directly to the water companies—budgeted over the year, so that they do not get themselves into debt.
Several Labour Members have linked charges to ability to pay. That is not how an industry functions. We can tell that from Ofwat's briefing, which says that we must achieve
a better relationship between charges and consumption.
People are asked to pay for their water because someone has to, and there should be a relationship between the amount of water consumed and charges borne. If the Government of the day require that certain people—those with large families or the elderly who live in certain types of accommodation—are given special help, that is the Government's job, not that of the industry. The industry's role is to fulfil the obligation placed on it with privatisation: to bring a derelict industry, which had been neglected for decades, up to modern standards. To achieve that, it must have resources. It is charged with raising those resources from its consumer base, and that is exactly what it does.
In the early days after privatisation, it was inevitable that water charges would rise, for the simple reason that the industry was so run down under public management, and its infrastructure so antique, that a massive amount of water was lost into the environment or into the soil. All those issues had to be dealt with quickly.
The industry was also charged not only with improving the quality of our water—which in many areas had become a lot less than safe—but with cleaning up our rivers, so that wildlife could flourish and we could have more fish swimming in our rivers. It also had to clean up our beaches and coastal waters, which had become highly polluted under public sector management and were unhealthy for bathing.
The industry had to reduce or eliminate the dumping of sewage sludge into the sea in pipes that were barely beyond the tidal level of the sea. Sewage was being washed back on to our beaches. The industry was given all those tasks, to improve the quality of water. Under public management, it had walked away from its responsibilities. They were tasked to the new industry, which has been doing its very best.
A few directors, whose incomes were profit-linked and linked to improvements that they produced, received relatively high salaries. The Labour party leapt on that and made it an enormous political issue—so we are debating a Bill that is largely unnecessary and could have been dealt with by negotiation between the industry and the Government.
Hon. Members have mentioned the prohibition of disconnection in particular. It has been pointed out time and again that the number of people being disconnected is going down rapidly. The message is getting through that these disconnections are bad news: they are bad news for the industry, the Government do not like them, politicians do not like them and they result in a bad reputation. Gradually, that problem is being overcome. We have gone from tens of thousands of disconnections under public ownership to practically none—about 600 cases this year, and that may be better still by next year—but the industry said in The Daily Telegraph that it is rightly concerned that
this move will give a green light to people who simply don't want to pay.
There are always people who do not want to pay. They do not want to pay for gas or electricity and sometimes they do not want to pay in Marks and Spencer, so they pick up a

few things and try to walk out of the store without paying. Nobody says that people should be allowed to get away with that, however poor and vulnerable they may be. The water industry is no different.
We keep hearing about how the precious commodity of water is in short supply. If Britain is blessed with anything, it is with a more than ample supply of water. The hon. Member for Ceredigion (Mr. Dafis) has made that clear. The water companies are tasked with ensuring that that adequate water supply is properly managed so that we do not have droughts. Droughts are less a product of our climate than a result of the mismanagement of the industry over the years. The Government should not paint a picture of an industry that is careless of the interests of its clients, which it is not, and that overcharges, which it does not—the rate of increase in water charges dropped dramatically after the first period. If, as I expect, the industry follows the example of the other privatised utilities, water charges will start to come down in real terms. The Government would have served the industry better by leaving it alone—it is monitored by several agencies—to fulfil its task.

Dr. Norman A. Godman: Many of my constituents will welcome the provisions in part II of the Bill, which establishes a water industry commissioner for Scotland. That will be a welcome change in Scotland to the legislation introduced by the hon. Lady's Government in 1994.

Mrs. Gorman: I am glad that the hon. Gentleman's constituents will be pleased. I am not au fait with the details for Scotland, because I expect the issue to be dealt with by the new Scottish Parliament. Three agencies—the Environment Agency, the drinking water inspectorate and Ofwat—already monitor the activities of the industry. It is very well managed and controlled. [Interruption.] The Government Whip is pointing to his watch and asking me to sit down. I have sat through the whole debate. I am fascinated by the subject and I intend to say what I came here to say.
Far from receiving brickbats from the Labour party, the water companies should be congratulated on the tremendous improvements that they have produced in the industry. We should not discourage them by adding to their costs with the provisions on metering. The enormous increase in the costs to the industry will be borne by the respectable customers who pay their bills. We should trust the industry, monitored as it is, to get on with its job. We shall go through the motions of the Bill, but we should remember that most of it has nothing to do with the needs of the industry and everything to do with the Labour party's rhetoric in the run-up to the general election.

Mrs. Linda Gilroy: I congratulate my right hon. Friend the Minister for the Environment on the robust and effective way in which he and his colleagues at the Department of the Environment, Transport and the Regions have addressed so many water quality and cost issues in their first 18 months in government, as well as some key associated environmental concerns. Significant steps have been taken to meet our manifesto commitment to pursue
tough, efficient regulation in the interests of customers and, in the case of water, in the interests of the environment as well".


Many of my constituents, who face the highest water bills in the country, will welcome the Bill. By removing the water companies' power to disconnect the water supply to private dwellings, by prohibiting them from using devices to reduce the amount of water available for use to enforce bill payment and by introducing the power to make regulations in respect of charging schemes, the Bill will give important new protection to vulnerable customers.
The Bill will go a long way towards achieving a fair and affordable water supply for vulnerable customers and offers an increase in customer control and choice over how water is provided to them and how they pay for it. That will offer substantial help to many people, particularly in the south-west, where water bills are the highest. According to the report produced by the House of Commons Library as a background to the Bill, the average bill in the south-west for 1998–99 is £354, compared with the average for all water companies in England and Wales of £242.
In the Labour party's document "In Trust for Tomorrow" we said that we would
outlaw disconnection for residential properties and ban compulsory water metering".
The Bill implements that policy clearly and unequivocally.
Balancing price and quality and taking into account environmental considerations is difficult without causing undue tension for one of the key stakeholders. Nowhere has that proved more true than in the south-west over water. The average bill of £354 is 10 per cent. of the income of many less-well-off households. Many pensioners and younger people in my constituency live on incomes of between £2,000 and £4,000. It is little wonder that, faced with such a situation and the many other competing needs for food, warmth and clothing, some of them have problems with payment. I can say with confidence that the measures proposed in the Bill will help many of my constituents.
That is why I have taken a particular interest in the way our policies to regulate the utilities, particularly water pricing, have developed since the election. I am astonished that not a single Member from the Opposition parties representing Devon or Cornwall is present for this important debate. The Liberal Democrats, who have been vociferous on water issues, are conspicuous by their absence. I understand that they intend to oppose the Bill because it represents the creeping advance of metering. Many elderly people in Devon and Cornwall would like to be better able to assess whether water meters would be of value to them and would be interested to know that that is the Liberal Democrats' policy. I shall ensure that they do know about it.
I know that my right hon. Friend the Minister for the Environment shares my concerns about water charges, about the substantial increases since privatisation and about the burden that they place on my constituents. Water companies with long coastlines have passed on to customers the consequences of the environmental programme that goes with their responsibility for treating waste water and sewerage. The uneven distribution between companies of responsibilities for the coastline and the beaches causes fundamental social and economic concerns.
My right hon. Friend the Secretary of State for the Environment, Transport and the Regions, in the guidelines "Raising the Quality", published the environmental and quality objectives to be achieved by the industry in the period 2000–05. They offer the prospect of an ambitious programme to improve water and environmental quality coupled with widespread real reductions in water and sewerage bills for the first time since the companies were privatised in 1989. Reductions in water bills of 10 per cent. and possibly more are a real prospect.
I hope that we will begin to go further in narrowing the differential between water charges in the south-west and elsewhere. In "Raising the Quality" the Secretary of State asked the regulator to give special consideration to the regional impact of the quality programme:
We will wish to ensure that the detailed obligations at company level are defined in a way which avoids unacceptable impacts on water prices in different parts of England and Wales and reflects local environmental priorities. We will provide further guidance on this as necessary as the programme is defined at company level.
I welcome those statements and invite my hon. Friend in responding to the debate to confirm that he believes that there is some scope for addressing the wide gap between what my constituents have to pay compared with charges in the rest of the country. That has considerable general bearing on the vulnerable customers who can benefit from the Water Industry Bill as well as specific relevance.

Mr. Brake: If the hon. Lady is on the Standing Committee considering the Bill and if the Liberal Democrats table an amendment to address the regional disparity in water prices, perhaps she will support us. Let me also point out that at present there is a greater proportion of Liberal Democrat Members in the Chamber than Labour or Tory Members.

Mr. Alasdair Morgan: But not Scottish Nationalists.

Mr. Brake: True.

Mrs. Gilroy: Still, Liberal Democrats representing the part of the country that suffers the most problems are conspicuous by their complete absence. The hon. Member for Carshalton and Wallington (Mr. Brake) mentioned the consideration of the Bill in Committee. I shall cover some of the issues in my speech, but I am not sure that the Bill—welcome though it is—is the vehicle for achieving the objective that I share with Liberal Democrat Members with constituencies in Devon and Cornwall.
Under the present proposals, customers in England and Wales will continue to pay very different bills, with my constituents shouldering a greater burden than others. It seems wrong that households in one part of the country should be penalised for the performance of their local water company or because they live in a particular place. Reference has been made to the fact that water meters measure only water volume and not sewerage, yet it is sewerage charges that cause my constituents' bills to be so high. I agree with my hon. Friend the Member for Birmingham, Northfield (Mr. Burden), who said that we should look at many issues relating to metering in the longer term.

Mr. Letwin: The hon. Lady said that she thought that the Bill might not be the right vehicle for an amendment


such as that described by the hon. Member for Carshalton and Wallington (Mr. Brake). Has she noticed that clause 5(4) specifically prohibits the Secretary of State from making any such move under the Bill?

Mrs. Gilroy: I shall come to that in just a moment.
Following discussions with the stakeholders in the south-west, I approached my right hon. Friend the Secretary of State with proposals for a water quality fund. I know that "Raising the Quality" restates the principle that quality improvements have to be paid for by water and sewerage customers, but the "polluter pays" principle has been used as an argument against the consideration of such a fund. I am not at all sure that all polluters do pay or that there is any practical way of making them do so.
The whole country benefits from improvements in bathing water and the avoidance of prosecution by the European Union—the state, rather than one region, has an obligation to comply with standards—yet only those living in coastal regions end up paying for improvements. On equity grounds, I believe that there are sound arguments for a scheme that smooths the difference in bills arising from those factors and, although it may be difficult to achieve that under the present legislative and regulatory framework, I urge my hon. Friend to examine that proposal.
Clauses 4 and 5 give the Secretary of State powers to make regulations on charging schemes. They are intended to allow him to protect customers who are vulnerable owing to ill health, disability or financial circumstances, by specifying the nature of the support that they may receive. That could include a requirement to charge such households the average bill for the company.
I hope that, through the Bill, my right hon. Friend will ensure that the regulations can protect these vulnerable customers in the south-west from high average bills which mean that they could be paying £153 more than those in the Thames region, where the average bill is only £201. Perhaps my hon. Friend could refer to that in his reply to the debate or, if time does not permit, write to me to clarify his view on an issue of great importance to some of my constituents. He may also care to ponder how a Cabinet Minister would feel if he received a £7,000 bill for water and sewerage charges, which would reflect a similar proportion of his income.
My right hon. Friend and his colleagues in the DETR have shown considerable political will and focus in bringing forward their proposals to ban disconnection, to put the consumer in the driving seat on metering, and to provide choices in the methods of charging and protecting vulnerable customers. Those measures will all be of significant value. The Bill is an important milestone; it will contribute to our agenda of fairness and social justice and I commend it to the House.

Mr. Alasdair Morgan: I was interested to hear what my hon. Friend the Member for Ceredigion (Mr. Dafis) said about value added; he argued that Welsh water should not be exported but that the industries and jobs that needed the water should be moved to where the water was. In Scotland, of course, we have a different concept of value added—we change our water into whisky before we export it.
I shall be brief as only a small part of the Bill—clauses 12 and 14 and some of the schedules—has any relevance to Scotland. The provisions are tacked rather uncomfortably on to the end of more substantial and totally different proposals for England and Wales. It was significant that the hon. Member for West Chelmsford (Mr. Burns), in opening for the Opposition, did not discuss the Scottish clauses, which perhaps reflected his party's political prospects north of the border.
The debate concerns the principles rather than the details of the Bill. For me, the Bill contains two important principles. First, it deals with an issue that has been devolved to the Scottish Parliament under the Scotland Act 1998, which recently received Royal Assent. The Scottish National party believes that the matter should be left for that Parliament, which will be set up next year, to consider.
Secondly, I believe that the overriding desire of the Scottish people is not for a water regulator but for full democratic control of, and accountability in, the water industry in Scotland. The Government have done a U-turn on their pre-election commitments on that. In December 1997, the Secretary of State for Scotland said:
The Labour Party manifesto included a commitment to return the Scottish water industry to local democratic control.
In response to a question that I asked, he said,
we are strengthening the democratic controls".—[Official Report, 16 December 1997; Vol. 303, c. 154.]
The Bill fails to deliver on that commitment. A regulator will still be democratically unaccountable—the Bill may impose more controls, but they are hardly democratic. If the Government had any desire truly to democratise Scottish water, they could have used the Bill to do so. The fact that they did not must lead us to conclude that they have no intention of fulfilling their manifesto pledge.
My party will seek to remove the provisions in the Bill that deal with Scotland. It is an affront to the spirit of the Scotland Act that such measures are being dragged through the House on the coat tails of a Bill for England and Wales. As the measures will have to be implemented by the Scottish Executive in any case, it makes no sense for Westminster to impose a framework for them. The Scottish Office—and the House of Commons—should leave the Executive to make up their own minds about the powers of the consumer council area committees, about the role of any regulator, if there is one, and about how those bodies and individuals are to be financed.
The Scottish National party will seek to introduce legislation in the Scottish Parliament to return water to democratic control, a policy that I am sure will have widespread support among a range of Members of the Scottish Parliament. I believe that, by imposing the system proposed in the Bill, the Government are crudely attempting to tie the hands of the Parliament in any future review of the Scottish water industry. Indeed, the Secretary of State for Scotland confirmed that that was so. Of the Parliament, he said:
I would expect that it will wish to allow the system to settle, and to perform, before considering any further options."—[Official Report, 16 December 1997; Vol. 303, c. 147.]
Next May, the people of Scotland will vote for parties with distinctive proposals for Scottish water. They will not look kindly on a Labour Government who use Westminster to put up barriers to real reform. There is no


justification for introducing a system now and using it as an excuse for preventing the Scottish Parliament from making further changes.
What we have here is a far cry from what was planned by the right hon. Member for Hamilton, South (Mr. Robertson), who said at the Scottish Labour party conference before the election:
On my first day in St. Andrews house, I will end this undemocratic farce.
Of course the right hon. Gentleman bypassed St. Andrew's house and went straight to the Ministry of Defence. However, that does not excuse his colleagues in not carrying the plan forward.
The Government will not be able to use the Bill to run away from the issue of democratising Scottish water at the May election in Scotland. The Scottish water industry needs detailed proposals to restore full democratic accountability. We will not seek to oppose Second Reading, as a number of measures proposed for England and Wales are welcome. However, we shall certainly seek to amend the Bill as it passes through the House.

Mr. David Kidney: This is a comparatively short Bill, so I shall keep my remarks short. I wish to comment on two points only, but I begin by congratulating the Government on the way in which the review that led to the Bill was carried out. The review was timely, and followed the Government's decision that there had to be an alternative to metering charges from April 2000. The manner in which the review was carried out—by consultation and by responding to the representations received—was commendable.
I wish to refer, first, to disconnections and, secondly, to the alternative to metering charges. On disconnections, the representations received in response to the consultation have not been strong enough to overturn Labour's determination to end the unfair practice of disconnecting people's water supply. Access to water is a basic entitlement, by reason of health, hygiene and social justice.
Water companies will lose the ability to threaten cut-offs of supply, but that does not necessarily mean that bad debts must rise in response. We have heard tonight that two companies have a policy of no cut-offs of supply, and nine companies have carried out no disconnections at all in the first six months of the financial year 1998–99. The Government strongly support water companies in their measures to avert bad debt—for example, the creation of the charitable trusts; providing easy-payment schemes; new designs of tariffs; helping customers to reduce their bills and minimise their use of water; and continuing direct payments from the Department of Social Security in appropriate cases.
Severn Trent, the largest water supplier in the west midlands, has written to me to say that it has a good story to tell in terms of such measures. Its charitable trust has helped more than 2,500 households, and it is a co-founder of a pay point scheme which allows the payment by instalments of water bills at more than 1,200 shops and petrol stations in the region. In the past six months, only two disconnections of household properties have been carried out, among 3.5 million customers.
I must not mislead the House into thinking that Severn Trent does not mind losing the power to disconnect—it does mind. I disagree with the company on the principle of disconnection, but I agree that it has a good point in terms of the practice of enforcing payment by customers. The civil debt recovery system is not as good as we have been led to believe by some hon. Members today.
Severn Trent referred me to a letter—which I must admit I missed—in The Times on 27 November from a solicitor in private practice, who said:
As a practising solicitor I can think of no instance in the last five years when a bailiff alone has managed to recover either money or goods … University research that I have seen shows that after county court proceedings in the small claims courts only a minority of defendants paid up on time.
After six months many had still not paid. If the water industry is to rely on bailiffs it may as well write off those debts now.
That is a gloomy prognosis for the companies.
I had 20 years' experience in private practice as a solicitor before I became a Member of Parliament. Generally speaking, the enforcement system in the county court can work, but it is a bit of a creaking machine. I recommend that Ministers take an interest in the Lord Chancellor's Department's work to improve the enforcement of judgment debts, because, even in my short time as a Member of Parliament, I have received many representations from individuals and businesses who have had difficulty in getting payment even when they have won their county court cases.
There is broad agreement that we should keep open a choice of alternatives to compulsory metering. Most agree that, for the time being, rateable value is the only realistic option. For example, the Ofwat National Customer Council submission that we have all received says that it is the only alternative at present. It is not, however, a satisfactory alternative to metering. There have been no new rateable valuations since 1990, and all new houses have to be metered.
People do not understand how rateable values that have ceased to exist none the less determine how their water bills are made up, and there are injustices in past valuations that cannot be remedied retrospectively today. I have dealt with complaints from constituents who could not understand why they could not change their rateable value when they found that it was out of line with their neighbours'.
The citizens advice bureaux and the Ofwat National Customer Council report significant numbers of complaints on that point. If rateable valuations remain the only alternative to meters for very long, the choice will become less and less meaningful. That is why the Chartered Institute of Environmental Health has described the Government's proposals as "metering by stealth". I hope that the Government will eventually listen to the calls for access to council tax data, and I note that they have not ruled out the possibility in their response to the representations received.
Some Conservative Members described the Bill as an opportunity missed. I agree in one respect: the Government missed the opportunity to introduce the excellent proposals contained in my ten-minute Bill in the previous Session. The Water Charges (Amendment) Bill would have brought relief to the small, privately owned sewage works in rural areas. However, before the Minister thinks of saying anything sympathetic or encouraging


about that Bill, let me tip him the wink and explain that it was a Government Whip who objected to it, so he should not be tempted.

Dr. Peter Brand: We have had a lot of discussion about a little Bill. The socially concerned aspects of the debate, in particular, have had nothing to do with the Bill. I am delighted that Conservative Front Benchers do not support metering. In 1988, roads in the Isle of Wight started being dug up in one of the biggest social experiments ever in compulsory water metering: 95 per cent. of households were metered over three years, with almost 60,000 meters fitted.
The Isle of Wight was the largest of the 11 compulsory metering areas. What was the result of that great experiment? No reference is made to it in any of the background briefing for the Bill, and the industry does not seem to have remarked on it at all. After the experiment, 60 per cent. were better off, with 20 per cent. substantially better off.
The people who benefited most were not the little grannies in modest but fairly well-rated houses, but the people with enormous holiday homes who used them only during August. Some 40 per cent. of people were worse off, of whom 15 to 20 per cent. were considerably worse off, because at that time no provision was made in the benefit regulations to compensate people for the new bills that they had to pay.
Families with two children on a disposable income of £60 a week suddenly had to find an extra £5 to £8 a week to pay for water. I am glad that hon. Members have referred to the public health importance of water, because I saw the result of that policy. Children went unwashed, and when I visited little houses as the family doctor, I could hear the loo being flushed as I walked up the garden path. They knew I was coming, and they were embarrassed by the smell. It is disgraceful that that experiment was allowed to happen.
The Government have had to introduce a Bill because the time restraints on the previous legislation meant that something had to be done before April 2000, but they have not thought it through. If we take the Bill at face value and accept what the Minister said, within the area of each water supplier, communities will have a choice. However, the Bill will make it impossible to have a meaningful discussion on structuring tariffs to protect people, such as the elderly person with a small need for water living in a large house.
If the Government had been brave enough to have a policy, we could have gone back to a system based on rateable value and where people live, in the hope that that had some relationship to their disposable income, or we could have had water metering with a system that had some input into bills by suggesting how tariffs could be drawn up. Under such a system, standing charges and how much is paid for the essential amount of water per person in the household could have been written into the regulations.
Ofwat has been useless. With the previous Government, it galloped towards the metering of water. The Bill pretends that choice will exist, but it will not, because metering is a one-way street. Householders will be able to change their minds once, and go back a few steps, but most of the arrows point downstream, to inevitable

compulsory water metering. I hope that the Government will consider the results of the trials that have been carried out. Metering is disruptive, although it saves water, and that is good. A proper tariff structure must be built into water metering, and that is absent from the Bill.

Mr. Letwin: Is it Liberal Democrat policy to extend that approach to gas and electricity?

Dr. Brand: That is an interesting point, because three Conservative Members who have spoken equated all public utilities. However, people usually have a choice between gas and electricity for heating, and when the pinch comes, they can use coal. Many of my constituents still use coal because they cannot afford any other services—we are not a wealthy community. People can also use bottled gas or paraffin. But they have no choice about using water. In the 20th century, people should not have to try to flush their loos by taking a bucket to the stream or their rain butts.

Mr. Letwin: We are beginning to discover something interesting. Does the hon. Gentleman accept that there is a relevant analogy between gas, electricity and water? If what he is saying about water is correct, and poor people could find themselves unable to afford it if it is metered, however much choice there may be, the same must apply to commodities such as gas and electricity, which are also paid for by quantity.

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. At this late stage in the debate, I am not sure that we should pursue other commodities. We should stick to water, which is the subject of the Bill.

Dr. Brand: There is no doubt that we are talking about a monopoly supplier of something that has a monopoly in its uniqueness, because its availability is necessary for life and civilisation to be sustained—plumbing did more for this nation than doctors ever did.
I am sorry that the Government have not taken an opportunity to do something positive in the Bill and to have a positive policy. If we ever want a system based on rateable valuables or council tax bands, we will need another Bill to de-meter people compulsorily. If the Bill is enacted as it stands, by the time an alternative is in place, most people will be stuck with metering.
I realise that I am using more than my customary six minutes, but, finally, I hope that the people who were compulsorily metered will have 12 months to change their minds after the passage of whatever Bill is finally enacted. I hope that they will have the same opportunity for choice as new consumers who opt for metering, if we are to continue with a hybrid system, as it is grossly unfair for people who have had no choice not to be given an opportunity to put the clock back.

Mrs. Helen Brinton: I certainly welcome the principle of the Bill. Rateable value must be retained in the absence of any other universal—and fair—basis for water charging. Also, the very vulnerable people about whom we have been talking tonight must be protected, since we all understand that an adequate and


clean water supply is essential for health. We have understood that since the great public health reforms of the previous century.
We certainly do not want to return to the days when poor living conditions were directly responsible for recurring epidemics of infectious diseases, as the hon. Member for Isle of Wight (Dr. Brand) will know. Many diseases today are still caused by a lack of clean water and of proper, adequate sanitation. Therefore, the provision of water is different from that of gas or electricity.
However, water is not a free good. The water we get from our taps is not the same as the water we would get by putting a bucket out in the rain. The water in the bucket is like any other raw natural material—it needs to be processed to make a product suitable and safe for human use. Therefore, it costs a great deal of money to provide an adequate supply of clean water.
The water companies have rightly been required to invest heavily in reducing leakage, and repairing and updating an antiquated infrastructure. However, we are not discussing merely a financial cost; the supply of water also carries environmental costs, which will rise sharply with increasing household consumption—more households using more water than ever before.
I welcomed with great happiness the Government's response to the report on housing by the Select Committee on the Environment, Transport and Regional Affairs. It suggests that water companies should be given a role in the planning process, rather than simply being required to meet demand with supply. The Bill emphasises the need to protect vulnerable customers, and to give customers increased choice. We all agree that that is right. Nevertheless, I remain concerned that the Bill should not further the myth that water is a free commodity.
I fully commend the wish to ban domestic disconnection, because no one should be denied the right to water because they cannot pay, but what sort of measures will be put in place to ensure that the value of water—I stress the word "value"—is recognised, and that it is not simply a matter of "won't pay", rather than "can't pay"? I have seen figures that show that a sizeable number of customers whose water is disconnected pay their bills and are reconnected within 24 hours. That fact suggests that they may be unwilling rather than unable to pay. How will such people be made to pay?
I have some concerns on water metering. I welcome the power to make meters compulsory for those with pools and sprinklers. Metering is an essential tool, not only for charging but for managing demand and ensuring that customers use water wisely. High-volume users should pay on the basis of how much they use, but I am concerned about the idea of free meter installation, together with a customer right to revert to non-metered supply within 12 months.
Can the cost of free installation of meters on the basis of customer demand be justified with no more than a year's guaranteed use? Where will the necessary resources in cash and person power come from? What important, or even essential, investment and improvements will have to be sacrificed?
I understand that water meters cost £250 to install. If customers later choose to go back to being charged under the rateable value system, will not millions of pounds of

investment be left underground and unused? I am sure that the Government have thought about those matters, but I should like the implications to be clarified. Would it not be better to expect customers to pay towards the cost of a meter, either initially or if they later decide to stop using it? For those who cannot afford £250, perhaps other means could be found to assist them if they wish to have a meter.
Let us not forget that climate change predictions mean that metering may become essential in some parts of the country. We have heard some comments on that tonight. The north and north-west are likely to have plenty of water—more even than now—but the south and south-east could become semi-arid regions. Unlike the case of electricity, it is impractical—indeed, ridiculous—to talk of some national grid to redistribute water according to need. This is not a good time to encourage extravagant attitudes to water use.
We may be in danger of allowing a part of our Government's wholly laudable agenda to promote social equity, which is what Labour Members want, to run counter to an equal and pressing need to conserve our environment. If we do not acknowledge the primacy of environmental concerns, we may be in danger of running against the tide of public opinion. Recent surveys show that the public understand the importance of environmental protection and enhancement.
If sections of the population still believe that they should be free to indulge wasteful and destructive life styles that are ultimately to the detriment of us all, it is well within the Government's agenda to discourage them.

Dr. Brand: Will the hon. Lady give way?

Mrs. Brinton: No, I certainly will not at this stage.
The Bill is an excellent, much-needed social measure. Equal concentration on environmental aspects would only enhance it.

Mr. Tony Colman: As we are running short of time, I have cut sections of my speech, but I commend the speech made by my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson), which covered many of the points that I would have made.
The essential theme of the Bill is that of sustainable development—economic development, environmental protection and social equity being bound up with each other. Like other hon. Members, I find the damascene conversion of Conservative Front Benchers interesting, having had several discussions with the former Secretary of State, the right hon. Member for Suffolk, Coastal (Mr. Gummer), whom I hoped would attend the debate.
The hon. Member for Billericay (Mrs. Gorman) appears to have forgotten that it was the Conservative Government who were in charge during those 18 years of under-investment in the water industry. When privatisation occurred, a £1.1 billion dowry was given to the privatised companies and there was a £5 billion debt write-off; that was succeeded by a 100 per cent. increase in water and sewerage charges. The net result was a bonanza for shareholders.
One of the Labour Government's first actions in May 1997 was to hold the water summit, at which my right hon. Friends the Secretary of State for the Environment,


Transport and the Regions and the Minister for the Environment set matters right. The 10-point plan resulted in the water industry breathing a sigh of relief and getting off the bandwagon, having realised that they had to be accountable to the community. The consultation document was published earlier this year; the Government's response came on 18 November; and today, 7 December, we are having Second Reading of the Water Industry Bill. That is the sort of speed that I like to see the Government display.
For eight years, I was chairman of the Low Pay Unit. The postbag often reflected problems with water metering, especially in social housing. Much of that accommodation in cities was built by housing associations during the Conservative years, but large, low-income families who lived there often suffered as a result of water metering.
The problem is not only a city matter, but a rural one. I grew up in a small village in north Norfolk: my water supply consisted of buckets of water from the neighbouring stream; bathing involved the use of a tin bath in front of the fire once a month; and there was an earth closet at the end of the garden—we grew excellent potatoes. Now, we have Anglian Water, which has imposed an 84 per cent. increase in charges since privatisation and the average charge in the area is £288 per dwelling, compared to £200 in London. My hon. Friend the Member for Plymouth, Sutton (Mrs. Gilroy) has told of the huge charges that are levied in the south-west.
Hon. Members have referred to what is missing from the Bill—the teeth that are missing from clause 5. The Government's response to the consultation document contains a page entitled "Competition", the provisions of which are absent from the Bill. There are proposals relating to the
further development of inset appointments",
by, for example,
allowing a number of premises to combine to meet the consumption limit
and proposals relating to
removing water companies' monopoly on making connections to the water supply system.
The main problem facing us is that there is no real competition in the water industry in England and Wales. Enron has moved in and bought out Wessex Water and French water companies have bought into Northumbrian Water and Three Valleys Water. Foreign-owned companies can buy and are buying up UK water companies, but UK water companies are not allowed to own each other. I suggest that the water industry needs an outbreak of competition.
We should consider how the UK water industry could develop internationally. We have spoken about sustainable development, and I pay tribute to the work that Thames Water, the London water company, has done. Having stopped the leaks, it is now working on sustainable systems in Turkey, Indonesia, Puerto Rico, Shanghai in China, Thailand and Malaysia. It is important that UK water companies are able to compete globally in developing good water and sewerage systems.
Last week, I was lucky enough to lead an Inter-Parliamentary Union delegation to the Food and Agriculture Organisation of the United Nations in Rome,

on a visit to examine sustainable development. One of the key points in the final statement was that all people should have a right to full, productive, equitable and participatory water use. The Bill is our step towards that goal, taken in our Parliament.

Mrs. Claire Curtis-Thomas: Thank you, Mr. Deputy Speaker, for giving me the opportunity to speak in this important debate.
Water is a most valuable asset that makes possible life and death, equally. Under the Tory Administration, the privatisation of water was going to bring us many benefits. "Benefits" is an interesting word in that context. To most people, it means something more and something better. For the water authorities, it meant something more: more profits. It also meant something better: a better monetary return for the shareholders. Consideration of the stakeholder, the old and the young, and the environment was a necessary evil and was tolerated—just.
During the 1970s and 1980s, deregulation was the clarion call from business, and the Government duly responded. Many statutory regulations were relaxed and the onus of responsibility for compliance was passed along the chain to somewhere. The number of Government and local authority inspectors was reduced, and the public relaxed, secure in the knowledge that every business would be doing the right thing, having embraced deregulation. The people believed that, given the responsibility of managing themselves, the water companies would do just that.
To be fair, many water companies have behaved in a mature fashion and have been extremely diligent—but many have not. Given so much discretion, how many businesses would be prepared to do the right thing when it would undoubtedly dent the bottom line? How many would be prepared to revise charging programmes of their own free will and to install meters free of charge? Some did, but not all were willing. The deregulated water authorities were given enormous liberty, and then took enormous liberties with the British public.
Even the most damning public criticism failed to rein in the worst excesses of some water companies. I believe that only the threat of the Government's Water Industry Bill has brought the most pernicious operators to heel. Those companies were neither mature enough nor fit for deregulation: they needed to be restrained and told what to do because, left to their own devices, they failed to act responsibly. They have failed to do their best for the people of this country and for the environment on which we all depend. Their actions have led to the whole sector being publicly pilloried.
Many hon. Members and hon. Friends have spoken today, so I shall limit my comments to several clauses in the new Bill. Clauses 1 and 2 refer to disconnections. What was the collective moral position of the water industry that led it to disconnect nearly 21,000 homes during 1991–92? How could a responsible sector do that to the community that it served? Undoubtedly, the vast majority of individuals who suffered as a consequence were the most vulnerable, yet they were denied the most basic of needs. I am delighted that the Government intend to remove that right from the water companies. The disconnection policy gained a profit of a fraction of a penny per share—dare I suggest that the policy probably cost more than it realised? What motivates a company to apply such a punitive policy?
It is regrettable that the water companies have not seen fit to work together to protect the most vulnerable. I welcome the Bill's inclusion of measures to protect families on low incomes and people with certain medical conditions. However, we have challenged the water companies to do more—and there is more to be done.
I wish to introduce hon. Members to my constituent, Mr. Tebbit, who is desperately seeking a meter. Mr. Tebbit and I are both customers of North West Water, a company that has achieved an unenviable reputation for charging substantial sums for installing meters, ranging from £95 to £200. Mr. Tebbit wants to install a meter, but objects strongly—as do the Government—to paying for that service. Given that metering provides an incentive to reduce consumption, and hence supports conservation, Mr. Tebbit and I fail to understand why North West Water continues with that policy. The company is clearly more interested in retaining profits today rather than investing for tomorrow.
I am afraid that I must disagree with the shadow spokesman, the hon. Member for West Chelmsford (Mr. Burns): I do not think that this is a Bill of soft options. Protecting the environment and the vulnerable is not a soft option; it is the new Labour Government in action. I congratulate the Government on introducing the Bill.

Mr. Steve McCabe: In view of the time, I shall be brief. I echo the comments expressed by my hon. Friend the Member for Birmingham, Northfield (Mr. Burden). The debate takes place in a different climate from that which existed at the time of privatisation.
I acknowledge the tremendous efforts that Severn Trent has made in developing a dialogue with Birmingham Members of Parliament and in listening to criticisms of past actions and current difficulties. None the less, there is a pressing need for measures to deal with charges and metering, and to regulate other aspects of the industry. For that reason, I welcome the Bill.
I am particularly pleased that the Bill deals with trickle flow or trickle valve systems. Many of us were concerned that, after the court case that led to the banning of water key devices, those systems would simply become a widespread alternative measure. I have no particular objection to the voluntary use of volumetric meters, but their use must be voluntary. I am glad that the Bill addresses the issue of choice.
The consultation paper dealt with the concern about charging for community rooms, but as far as I can see, the matter is not covered in the Bill. As I understand it, people living in sheltered accommodation could find that their community room was metered. I wonder whether water companies will try to extend that to other community rooms or even waiting rooms—for example, in schools and hospitals. We need to examine the matter further.
The issue of residential homes for elderly persons does not seem to have been covered. It is great that we will ensure that there can be no disconnection of services for hospitals or schools, but the position of residential homes must be reviewed.
It must be made clear that council tenants will have the same rights as other customers. I am particularly concerned about what will happen when there is a transfer of tenancy. Tenants will not necessarily be protected by the Bill. That seems to run counter to the views expressed by many local authorities during the consultation period.
I wonder how much faith we can have in Ofwat and the role of the regulator. It is worth remembering that the reason that Birmingham and other authorities had to go to court was that the regulator accepted the water companies' arguments that water key devices were mechanisms for self-disconnection. However, the judge pointed out that that was wholly unrealistic and a breach of the statutory code. Can we be confident that in future the regulator, on whom many of the Bill's aims will still rest, will take a more considered view of the issues?
My hon. Friend the Member for Putney (Mr. Colman) mentioned competition. We could make much more progress in that, but the sticking point seems to be the matter of common carriage. That is provided for in the gas and electricity industries, and there is no reason why the same should not apply to the water industry. However, we must ensure that water companies do not impose punitive charges on customers who want to move to a different company.
For example, I understand that Severn Trent has advised Birmingham Water, a potential private company, that were the Queen Elizabeth hospital in Birmingham to switch to another company, Severn Trent would impose a standing charge of £32,000. Such a charge cannot be justified. I hope that the Government will act to encourage competition and to ensure that such punitive charges, which are designed to thwart competition, are not permitted.

Mr. Brian White: I welcome large parts of the Bill. I did not particularly want to speak on it, and have no wish to cross my hon. Friends the Members for Sheffield, Hillsborough (Helen Jackson) and for Birmingham, Northfield (Mr. Burden). I am speaking in the debate because I have been approached by many of my constituents, who believe that they will lose out as a result of the Bill.
I welcome the fact that disconnections are to be outlawed and that compulsory limiting devices are to be removed. The problem is that my constituents tell me that they need those limiting devices to be able to budget properly. They have been participating in an experiment with Anglian Water Services in my constituency and in Wellingborough. This self-imposed sanction of a limiting device has enabled them to budget carefully, and has helped them not only to pay their water bills, but to budget for their other bills. They say that, if the device is taken away, they will go back to their old ways and will not pay their bills.
I ask the Minister to consider allowing some people to have limiting devices in their homes voluntarily. I am opposed to water companies forcing people to have them, but some of my constituents argue strongly for these devices to be made available. They need not lead to cut-offs. With a limiting device, it takes 10 minutes instead of the usual couple of minutes to boil a kettle, and it takes 20 minutes to fill a wash basin. The Government could accept limiting devices and introduce regulations


that stipulate what the water companies can and cannot do. The default would not be cut-offs, but a return to normal billing methods. People would run up more debt by not paying their bills if they did not have the self-imposed sanction of limiting devices.
Some of the poorest people in my constituency have great difficulty budgeting. They feel that the Bill will affect them adversely. I welcome the Minister's comments about protecting the most vulnerable people. I ask the Government to consider the options in Committee, and to take notice of the vulnerable people who have told me that they will lose out as a result of the Bill.
The Government could take this matter on board without destroying the principle that compulsory limiting devices are wrong, and without going against the principle for which local authorities fought, which was that the introduction of limiting devices was unfair. The Bill is about choice, and I fear that the Bill will take away the choice of some of my constituents. The Minister should consider reinstating that choice in Committee.

Ms Joan Walley: I am grateful for the opportunity, however brief, to participate in the debate. I sat through the long days of the paving Bill and the subsequent legislation on water privatisation. This Bill is welcome, and the proposal to prohibit disconnections is a critical measure. I am sure that that provision will be fully explored in Committee.
I want to deal with the issue of environmental sustainability and public health. The Bill is a wonderful step forward, but I urge the Government to take on board the views of the Chartered Institute of Environmental Health and the second report of the UK Round Table on Sustainable Development. Recommendation FW3 states:
The Government should review the regulatory structure of the water industry in all parts of the UK, and devise a system to resolve the inevitable conflicts which arise between the parties during the periodic review process. New powers should be made available to the regulators where necessary to implement their statutory duties. The outcome of the review should include an explicit duty on all regulators, including the Director General of Water Services, to take account of sustainable development.
I fear that proposals in the legislation that specifically concern metering and prices will conflict with issues relating to public health and sustainability. That has already been suggested by today's debate. We must be fully confident that, in the third water price review, Ofwat can reconcile all those issues, and I urge the Government to explore them during the later stages of the Bill.
The Bill will lead to far more metering, but not to 100 per cent. metering. I hope that my hon. Friend the Under-Secretary will refer to discussions that have taken place between the British Bathroom Council and Members of Parliament who fear that proposals in the new water by-laws to introduce a valve system as well as a siphon system of flushing could, without full metering, result in an enormous loss of water. It is vital for further research to be carried out on this aspect, for a proper standard to exist for any new valves that are introduced and for proper safeguards to operate at the point of sale to ensure that the highest standards apply.
I urge the Government to consider those issues during the later stages of the Bill, and to take account of my requests in respect of further consideration of the serviceability standards of sewers.

Mrs. Rosemary McKenna: I think it important for a Scottish Member to comment on the Bill—a Labour Scottish Member, that is.
Unlike England, Scotland has public water authorities. That is a result of campaigns conducted in Scotland to prevent the last Government from privatising Scottish water. However, changes are needed. First, we should have a commissioner, for whom proper provision should be made. The commissioner should be able to regulate all the financial aspects of the Bill. Secondly, we should have three consultative committees, one for each authority. It is important that that should be done now. The Scottish Parliament will be elected on 5 May next year—

Mr. Alasdair Morgan: It will be elected on 6 May.

Mrs. McKenna: On 6 May. Some have more of an interest in it than I do, and the date will stick in their minds.
The Scottish Parliament will meet for the first time on 1 July, and it will have a host of items to consider. What we are doing will enable it to bring the legislation into force very quickly if it chooses. It will not be imposed on the Parliament; it will be able to choose whether to implement it. We will take much of the work load from the Scottish Parliament if the Bill goes through the House now, and can be implemented immediately.
On those grounds, I entirely support what has been said today. I hope that, in Committee, people will see the sense of introducing such legislation, and of enabling the Scottish Parliament to implement it if it chooses. Given that it will reflect the current make-up of this Chamber, I am sure that it will choose to implement it, thereby lightening the work load and freeing itself to make decisions on other Scottish issues.

Mr. Oliver Letwin: I am delighted that the hon. Member for Cumbernauld and Kilsyth (Mrs. McKenna) is able to assure the House that more than one quarter of the representatives of the Scottish Parliament will be Conservatives; I hope that she will prove to be right.
As my hon. Friend the Member for West Chelmsford (Mr. Burns) has said, in many ways, this is a cautious Bill. Indeed, as my hon. Friend the Member for Billericay (Mrs. Gorman) made clear, in many respects, it is a cosmetic Bill. It largely restricts itself to enshrining what is already the case. As my hon. Friend the Member for West Chelmsford said, there is no move to competition. There are no dazzling new charging systems. There is no major environmental advance.
As my hon. Friend the Member for West Chelmsford also said, and as has been repeatedly brought out in the debate, the Bill leaves a number of difficult questions of detail unresolved. Some were mentioned by my hon. Friend: for example, why are children's homes not exempt if schools and hospitals are? Some have come out in the debate. In a particularly thoughtful contribution, my hon. Friend the Member for North Thanet (Mr. Gale) set out two issues: bailiffs distraining tenants' goods when the landlord fails to pay a water bill; and the cost of repairs of pipe from the meter to the stopcock.
I believe that I am the proud possessor of the constituent with the greatest problem in the UK in that respect. Shortly after acquiring his house, he discovered that he had near on a mile of pipe from the water company's meter to his stopcock, a fact that he would have liked to discover before he bought the house. He now finds that he is unwittingly a major contributor to the investment programme of the UK water industry. The problem that my hon. Friend the Member for North Thanet brought up is perhaps most luridly exemplified by that, but there are many less lurid examples. In Committee, we shall want to deal with that issue.
Credit should be paid where credit is due. Labour Members also brought up serious issues of detail. One was voluntary BPU metering. It must be right that people who wish to plan their lives in an orderly fashion should be able to sign some special agreement with their water provider enabling them to install some form of BPU metering; I am sure that citizens advice bureaux and others throughout the country echo that. The Bill, probably unintentionally, prevents that. I would be happy if the Under—Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), were willing to assure the House that that will be sympathetically entertained in Committee.
Although the Bill is, generally speaking, cautious and cosmetic, in two senses, it is extremely interesting; indeed, more interesting than some aspects of our debate have brought out. It is on those issues that I wish briefly to dwell.
As has been mentioned on several occasions, the Bill leads gradually, and subtly, to a vast and cumulative increase in the extent of metering. No one knows how fast that increase will be, but it is remorseless; it is a ratchet. I take it that it is intended to be a ratchet—a ratchet with great political sensitivity in that no one will be forced into metering. Indeed, people have the delicious prospect of being able to opt for metering on a trial basis to discover whether it reduces their bills and then to opt out of metering, with the proviso that the next person who lives in their house will end up being metered all the same.
The Bill does not just move subtly and sensitively towards metering, a goal that all hon. Members, or almost all, could share with the Government. It also brings a new and interesting principle into utility regulation. It explicitly permits the Secretary of State to intervene, through regulation, in charging structures.
The Minister for the Environment made it perfectly clear that he regarded himself and the Deputy Prime Minister as being greatly restricted by the Bill's terms in applying those regulations. I think that the element of the Bill to which he was implicitly referring was clause 5(4), which states:
The power to make regulations under this section may not be exercised for the purpose of limiting the total revenues of relevant undertakers from charges fixed by or in accordance with charges schemes.
The problem is that, although we accept that it is important to restrict the Secretary of State from changing the total revenues, that is an entirely different proposition from restricting him from making changes to the balance of the charges. Unless I am mistaken—I should be more than willing to admit the mistake if Ministers wish to

intervene—nothing in the Bill restricts the Secretary of State from altering any charges that he wishes to alter so long as, ultimately, the total revenue is not altered or—I should go a little further—so long as his "purpose" is not to alter the total revenue.
As there is relatively little understanding of the price elasticity of demand in water, it is not clear whether the Secretary of State might, by mistake, also alter the total. The Bill does not prohibit such an alteration but refers specifically to the "purpose". However, for now, let us ignore that point. The main point is that the Secretary of State—within the terms of the Bill, acting perfectly properly—can adjust the whole charging structure so long as his purpose is to ensure that the total revenues raised by charges overall remain constant.
None of us knows—I suppose that even current ministerial incumbents do not know—just how that regulatory power will be used. However, there were ample signs in the statements made in this debate, including those by Labour Members, that the Minister for the Environment intends to use the power to achieve what I suppose he would describe as a greater correlation between payment and the ability to pay. The power is intended, in other words, to introduce into United Kingdom utility regulation the opposite of the principle of economic transparency upon which, so far, the entire regulatory system has been built.
The fundamental principle of economic regulation of the United Kingdom's utilities has always been that it should be exactly that: economic regulation. Moreover, the principle has been that, in cases in which the Government intend, for perfectly good social reasons, to benefit a particular class of people, they should do so by means of explicit and transparent subsidy. The power provided in the Bill is the first time that a departure has been made from that principle. It is a very important departure.
The power is an example of a Secretary of State being able to tell essentially the Office of Water Services, and through it the water companies, how it is to structure charges to benefit those people in society whom the Secretary of State thinks it proper to benefit. The question arises: what is the argument for doing that? Moreover, if there is an argument for doing that, how far does it apply? Why does it not apply also to gas and electricity supply, or to the price of bread?
Labour Members waxed eloquent on the extraordinary importance of water, which no one denies. Water is a very important commodity—like bread, electricity and gas. For myself, I do not see very much difference between dying of cholera and dying of hypothermia; both prospects are appalling. If it is legitimate and proper for the Secretary of State to be given powers to alter the water charging structure, very quickly other Ministers may decide that, by analogy, they wish to introduce similar interventions in the charging structures of other utilities. Before we know it, we may be making such interventions in basic, vital commodities.
That is not new Labour but old socialism. It is not transparency of market products but a return to the use of the state to alter market dynamics and prices in such a way as to achieve certain social effects. If that is what the Government intend, they should come clean about it and announce that they have changed their mind and do not believe in the pure economic disciplines of a market


economy, with transparent subsidies to look after social groups, but are moving back to a world essentially of prices and incomes policies. The very idea behind prices and incomes policies was that one should protect certain socially disadvantaged groups by altering prices.
I am not saying that the Minister for the Environment wants to move there in one step; he is far too subtle for that. He has put only the first tentative marker on the route—a kind of motorway—that leads us down in that direction. My hon. Friend the Member for Billericay, in typically trenchant form, began to point that out, and she was quite right.
The Scottish elements constitute the second interesting aspect of the Bill. The Under-Secretary of State for Scotland, to whom the duty of making the Government winding-up speech falls, is the great expert in that domain. [HON. MEMBERS: "Hear, hear."] Indeed, he is particularly popular with Conservative Members for his ineffable courtesy and kindness in all respects.
A problem of a minor, constitutional variety has been pointed out by hon. Members on both sides of the House: why are those provisions in the Bill? The hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) has told us that, if he and his colleagues have their way, they will ensure that they are never invoked. If the Government really believed in Scottish devolution, they would not be introducing them, but would be waiting for the Scottish Parliament to do so.
I suspect that the Government are rather worried and find themselves in such a position that they believe that the hon. Member for Galloway and Upper Nithsdale may indeed be a member of the Scottish Government. They may also fear that the Conservative party will hold the balance of power, even if it does not hold 25 per cent. of the seats, in the Scottish Parliament. In such circumstances, it is forgivable that, even at this late hour, the Government are busily legislating for Scotland in this place in respect of matters that are utterly devolved under the Scotland Act 1998.
I mention that only as a mild form of teasing, but there is the serious question whether that is the precedent for another development, of which we have heard nothing: the idea that the famous third way should be implemented by introducing official regulators for public sector bodies. I have searched high and low, but I cannot find another example of that. I do not know of a case in which even the Minister for the Environment's own Department has yet suggested that remaining public sector bodies should have public sector regulators regulating them, independently from the Government. That is a most interesting proposition, which would be a remarkable and splendid test of this so-called third way.
If the hon. Member for Galloway and Upper Nithsdale and his hon. Friends do not control the Scottish Parliament and do not immediately undo this aspect of the Bill, we shall discover whether the Government will use Scotland as an experiment—in the way, to which Scottish Members sometimes object, that the Conservatives used it as an experiment for the poll tax—and the Government will discover whether using a public sector regulator to regulate a public sector body does or does not work. I venture a minor prophecy, which I may live to regret, although I doubt it: it will not work.
The Government believe that the most important aspect of a regulator is that he exists as an institution, and that the most important aspect of being regulated is that what

is being regulated is separate from the regulator. The important thing about being a regulator, however, is that he is regulating something private, which his "owners" do not own. If the Government set up a public sector regulator to regulate a public sector body, they will find that nobody is regulating anybody. We shall discover the truth of that in due course.
In short, we cannot celebrate the Bill because it is too cautious and too cosmetic. We shall look at its effects with great interest over coming years in the two respects that I have described. In the meanwhile, I can guarantee the Government that we shall engage constructively in the discussion of the details in Committee.

The Parliamentary Under-Secretary of State for Scotland (Mr. Calum Macdonald): This has been a constructive and positive debate and, if I have time, I shall respond to some of the wider points.
I begin by dealing with the Scottish provisions at part II of the Bill, which were raised by the hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) and by my hon. Friend the Member for Cumbernauld and Kilsyth (Mrs. McKenna). As my right hon. Friend the Minister for the Environment said when opening the debate, the Scottish provisions deliver a commitment made by my right hon. Friend the Secretary of State for Scotland in response to the outcome of the Scottish water industry review.
In conducting the review, we were guided by a number of important principles. We wanted to promote accountability, facilitate investment, promote efficiency, ensure continuity of public water supplies, protect public health and minimise disruption to the industry.
The previous Government created a problem by removing water from local authority control. As the Conservatives enjoyed no democratic mandate in Scotland, the water authorities were seen as unrepresentative and unaccountable. There was a real democratic deficit. The coming of the Scottish Parliament next July will change that.
The new Scottish Parliament will bring all public bodies in Scotland, including the water authorities, under strengthened and properly representative democratic control. By holding the Scottish Executive to account, the new Parliament will place the water authorities under the scrutiny that a modern democracy demands. That will be a crucial strengthening of the accountability and control of Scottish water authorities, and it will end for ever the perception and the reality of the democratic deficit.
The review gave careful consideration to a wide range of other proposals for the industry, including the possibility of returning it to pure local authority control. However, the recent local government reorganisation resulted in 32 unitary councils in Scotland covering the areas served by the three water authorities. Splitting up the three authorities between the 32 councils was quickly ruled out. It was clear that the number of councils made that solution impractical. It would have meant disproportionate costs, through the loss of economies of scale and through disruption, which would have been passed on to the customer.

Mr. Alasdair Morgan: If the fire brigade and the police service can be administered by the elected members of the 32 local authorities, why is it not possible for water?

Mr. Macdonald: I was going to make a further point that will answer that.
Another option considered in the review was to transfer responsibility for water and sewerage services to joint boards of local authorities. However, we have to recognise that the water authorities are large businesses with massive investment requirements. The current regulated business model has provided scope for delivering large investment programmes. We also recognised the value of having individuals with business experience relevant to such undertakings on the water authority boards. Ensuring the representation of every council on the relevant water authority board would have resulted in large and unwieldy boards. We concluded that that made joint boards impractical.
As well as resolving the democratic deficit through the new Scottish Parliament, we also wanted to make the water authorities more responsive to local authorities, other local interests and customers. We have done that in two main ways. First, as we announced last December, we have increased the number of local authority councillors on the board of each authority so that they now constitute almost half the total. Secondly, we have issued a direction to the water authorities requiring them to consult regularly with the local authorities and other representative bodies in their areas. That direction was issued in August this year and early indications suggest that it is working well. The new commissioner will be responsible for continual monitoring of the responsiveness of the water authorities to local interests.
Taken together, those developments constitute a fundamental reform. We are providing what the Scottish people want: a water service unambiguously in the public sector, with clear democratic control by a Scottish Parliament, with strengthened local responsiveness and a professional, independent regulator.
The review also emphasised that the industry is in need of substantial investment if Scottish people are to have the quality of water service that they deserve. That investment is necessary to bring the quality of our water up to the best British and European standards, to protect our beaches, rivers and seas and to renew the infrastructure gifted us by previous generations, which more recent generations and Governments have neglected. Of course, it will have to be paid for by all water consumers. Those are facts that we cannot avoid or escape.
The Government are committed to securing substantial improvements in drinking water quality and standards of sewage treatment. To deliver that, we have already taken bold and difficult decisions on charges. That was necessary to bring about the modernisation of the water industry in Scotland. As a result, real progress is being made on investment. New water treatment plants are being built over the length and breadth of Scotland. All the main Scottish cities will benefit from brand new sewerage works by the end of 2000.
For the first time in generations, substantial sums are being invested in renewing our water mains and sewers. The three authorities should invest more than £1.5 billion

over the next three years. That includes projects to the value of some £600 million that are being pursued in partnership with the private sector. We can already see benefits for customers from private sector innovation.
As I have already explained, the devolution settlement means that the water authorities will be under legitimate democratic control. The direction on local consultation and the increased councillor representation mean that the water authorities will be much more responsive to local concerns. Despite major changes, they remain public sector monopolies, so the Scottish people need a safeguard to ensure that the money that they pay in charges is being well spent.
The review recommended that an effective safeguard needed a new set of regulatory arrangements. That is why we are establishing the commissioner, who will be responsible for all aspects of economic regulation and for promoting the customer interest.
Under the new arrangements, the commissioner will be obliged to have regard to a range of factors relevant to the water authorities when framing advice on charges. Among those factors will be the economy, efficiency and effectiveness with which the authorities use the resources at their disposal in delivering services to their customers. In short, it means sustained pressure on the authorities to deliver their services with maximum efficiency. Other important factors will be to ensure the authorities can deliver the required environmental and customer service standards.
The review also emphasised the importance of promoting customers' interests. The three consultative committees will help to discharge that role. They will advise the commissioner about the concerns of customers in their respective areas and the commissioner will have regard to that advice in discharging his or her functions.
The water authorities are making real progress in the way in which they deal with their customers. Nevertheless, we believe that the new arrangements will encourage yet greater sensitivity and responsiveness to the needs and expectations of customers.

Mr. Alasdair Morgan: Will the Minister clarify a remark by the hon. Member for Cumbernauld and Kilsyth (Mrs. McKenna)? Is he implying that, if the Bill is enacted, clauses 12 and 13 will not be brought into force by the Secretary of State prior to 6 May next year? If that is the case and they are not implemented by then, will the power to bring them into force then devolve to the new Scottish Parliament?

Mr. Macdonald: I was about to explain that point as it was the main thrust of the hon. Gentleman's objections to the Bill. I should make it clear that we attach a high priority to the measures in the Bill. They will deliver real improvements to the arrangements for regulating the water industry in Scotland and real benefits to consumers. There was a consensus among the major consultees on the water industry review—the Convention of Scottish Local Authorities, the customers council and the water authorities themselves—that that approach to regulation was sensible and the best way forward.
We believe that it would be wrong to delay taking steps that would allow the Scottish Executive to implement the new arrangements as soon as possible—if we did not take those steps now, another year would be lost. However, in legislating, we are not pre-empting decisions by the Parliament or by the Executive. It will be open to the Parliament to implement the provisions of the Bill as it sees fit.
Contrary to what the hon. Member for Galloway and Upper Nithsdale said, the hands of the Scottish Parliament will not be tied. It can either retain the proposed new arrangements or alter them in due course. It will be entirely up to the Parliament and the Executive to activate and implement the provisions. If they choose to do so—as I believe they will, given the support that the provisions have—they will be able to act straight away, so freeing up time in which the Parliament can undertake other important and pressing legislation. I am sure that the House will recognise that that is the right way in which to proceed, as I hope the hon. Gentleman will, on reflection, agree.
There have been a range of excellent and constructive contributions to the debate, particularly from my hon. Friends the Members for Sheffield, Hillsborough (Helen Jackson), for Birmingham, Northfield (Mr. Burden), for Scarborough and Whitby (Mr. Quinn), for Waveney (Mr. Blizzard), for Plymouth, Sutton (Mrs. Gilroy), for Stoke-on-Trent, North (Ms Walley), for Stafford (Mr. Kidney), for Peterborough (Mrs. Brinton), for Putney (Mr. Colman), for Crosby (Mrs. Curtis-Thomas), for Birmingham, Hall Green (Mr. McCabe) and for Milton Keynes, South-West (Dr. Starkey). Indeed, so many hon. Members spoke that I could not possibly list them all, but I acknowledge that hon. Members on both sides of the House made good contributions.
Some important points and suggestions were made, most of which will have to be dealt with in Committee, but I shall respond to one or two of them now in the hope of being helpful to members of the Committee and, indeed, the House. Hon. Members on both sides of the House, but especially my hon. Friend the Member for Milton Keynes, South-West, mentioned budget payments

and pre-payments. We are not opposed to the use of payment units as a convenient means of payment for customers who want one. Clauses 1 and 2 prohibit the cutting off of supplies or the use of a limiting device with the intention of enforcing payment. I hope that those who have expressed concern will be reassured by the fact that at least one company that has faced problems with payment is removing the cut-off valves, but is leaving the units as a means of budget payment.
My hon. Friend the Member for Sutton and other hon. Members mentioned regional disparity in pricing, referring in particular to South West Water. The positive answer to the problem in the south-west lies in the outcome of the periodic review. As a minimum, the Government expect in 2000 a reduction in prices for customers of South West Water that is broadly in line with the national picture. In his recent paper "Prospects for Prices", the director general said that customers in the south-west should expect a 15 to 20 per cent. reduction in 2000.
I apologise to hon. Members who raised points that I do not have time to deal with—I am sure that those points will be adequately covered in Committee.
The Bill envisages a new framework for the water industry in Scotland and new provisions for England and Wales. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

WATER INDUSTRY BILL [MONEY]

Queen's recommendation having been signified—

Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a),
That for the purposes of any Act resulting from the Water Industry Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums so payable under any other Act—[Mr. Allen.]

Question agreed to.

DELEGATED LEGISLATION

Madam Speaker: With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

GOVERNMENT TRADING FUNDS

That the draft Forensic Science Service Trading Fund Order 1998, which was laid before this House on 5th November, in the last session of Parliament, be approved.

POLICE

That the draft Functions of Traffic Wardens (Scotland) Order 1998, which was laid before this House on 5th November, in the last session of Parliament, be approved.

INCOME TAX

That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Ireland) Order 1998 be made in the form of the draft laid before this House on 9th November, in the last session of Parliament.

BROADCASTING

That the draft Broadcasting (Restrictions on the Holding of Licences) (Amendment) Order 1998, which was laid before this House on 11th November, in the last session of Parliament, be approved.

NORTHERN IRELAND

That the draft Rates (Amendment) (Northern Ireland) Order 1998, which was laid before this House on 12th November, in the last session of Parliament, be approved.

VALUE ADDED TAX

That the Value Added Tax (Input Tax) (Amendment) Order 1998 (S.I., 1998, No. 2767), dated 12th November 1998, a copy of which was laid before this House on 12th November, in the last session of Parliament, be approved.—[Mr. Allen.]

Question agreed to.

NORTHERN IRELAND GRAND COMMITTEE

Resolved,
That—
i. the matter of the Comprehensive Spending Review in Northern Ireland, being a matter relating exclusively to Northern Ireland, be referred to the Northern Ireland Grand Committee for its consideration; and
ii. at the sitting on Thursday 10th December:

(a) the Committee shall consider the matter referred to it in paragraph (i) above; and
(b) a Motion for the adjournment of the Committee may be made by a Minister of the Crown pursuant to Standing Order No. 116(5).—[Mr. Allen.]

ACCOMMODATION AND WORKS COMMITTEE

Ordered,
That Janet Anderson and Mr. George Mudie be discharged from the Accommodation and Works Committee and Mr. Keith Bradley and Mr. David Jamieson be added to the Committee.—[Mr. Mc William, on behalf of the Committee of Selection.]

CATERING COMMITTEE

Ordered,
That Jackie Ballard be discharged from the Catering Committee and Mr. Paul Keetch be added to the Committee.—[Mr. McWilliam, on behalf of the Committee of Selection.]

EDUCATION AND EMPLOYMENT COMMITTEE

Ordered,
That Mrs. Theresa May be discharged from the Education and Employment Committee and Mr. John Hayes be added to the Committee.—[Mr. McWilliam, on behalf of the Committee of Selection.]

PETITIONS

Health Services (Berkshire)

Fiona Mactaggart: I wish to present a petition, signed by 1,425 people of Slough, which states:
The Petition of citizens of Slough declares that the cuts in community health services planned by the Berkshire Health Authority will damage the health of the people of this town.
The Petitioners therefore request that the House of Commons urge the Secretary of State for Health to stop the cuts and require the health authority to work to improve the health of the people of Slough.

To lie upon the Table.

Electricity Pylons (Vale of York)

Miss Anne McIntosh: With permission, I would like to submit a petition from constituents in the Vale of York, expressing their protest against the proposed pylons across the North Yorkshire countryside. The petition has attracted 1,128 signatures and addresses specifically health and other risks. I hope that the petition will convince Ministers of the need to research the health effects of emissions from overhead power lines on people living nearby. The petitioners declare
that we object to the decision to allow electricity pylons to be erected in the constituency, and fear that they might be dangerous to our health.
The Petitioners therefore request that the House of Commons urge the Secretary of State for Health to commission government research into the health effects of emissions from overhead power lines on those living nearby.

To lie upon the Table.

Community Health Care (Berkshire)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Hill.]

Fiona Mactaggart: I requested this debate because of the series of cuts in community health services that were proposed by Berkshire health authority, which is responsible for health care across the area of the former Berkshire county council. As the House has heard, that has caused deep concern to more than 1,000 of my constituents who signed a petition on the subject which I have just submitted. I am glad, therefore, that since I requested the debate, Berkshire health authority has made significant changes to its proposals.
For many years, our county has been an area of major population growth, and only recently has health funding started to follow the people. Historically, Berkshire health authority has been underfunded in terms of the needs of the local population. Out of 100 health authorities, Berkshire comes 96th in spending per head, getting some £100 a head less than most health authorities.
The Labour Government have taken some initial steps towards rectifying that. I am glad to say that in both of the past two years, Berkshire has received among the highest percentage increases in health spending in England. Nevertheless, there is still an underlying deficit, and local health services remain very much under pressure.
Berkshire has an image of green prosperity, but the image is incomplete. The prosperity, and the good health that it brings, is not universal. Within Berkshire, the town that I represent, Slough, has the greatest deprivation. It also has the highest incidence of coronary heart disease in Berkshire. We are among the top 50 local authorities in the country for deaths of people under 65 from coronary heart disease—coming just between Birmingham and Newcastle-upon-Tyne—and among the top 10 for people of all ages, coming between Carlisle and Hackney. We have a worse record in terms of coronary heart disease—[Interruption.]

Madam Speaker: Order. What is that noise?

Fiona Mactaggart: I believe that I am responsible, Madam Speaker.

Madam Speaker: The hon. Lady should know that she should not have that device on in the Chamber.

Fiona Mactaggart: I know that, Madam Speaker, and I sincerely apologise. I do not understand why it is doing that.

Madam Speaker: Leave it outside.

Fiona Mactaggart: We have a worse record on coronary heart disease than not only other districts in Berkshire but neighbouring London boroughs such as Hillingdon, Hounslow and Ealing. We have the highest incidence of lung cancer, bowel cancer and pneumonia in Berkshire, and the most hospital admissions for all the top five causes of death.
"Our Healthier Nation" pledged to improve the health of the worst-off and to narrow the health gap. The pledge to tackle health inequalities was very important to Slough, as to other areas with a health record substantially worse than the national average.

Mr. Martin Salter: Will my hon. Friend give way?

Fiona Mactaggart: Certainly.

Mr. Salter: rose—

Madam Speaker: Order. Is the Minister aware that there is to be an intervention? The Chair has not been informed.

The Parliamentary Under-Secretary of State for Health (Mr. John Hutton): I have no objection.

Mr. Salter: Does my hon. Friend agree that, in some aspects of the review and in the lamentable episode of attempting to make cuts in community health services in Berkshire, the health authority failed to take account not only of the White Paper on the national health service but of the recent policy document "Supporting Our Families", which envisaged an enhanced role for health visitors? Is it not important for Ministers to impress on health authorities the need to produce policies in line with Government health policies?

Fiona Mactaggart: Absolutely. "Our Healthier Nation" talked about councils and health authorities working together, but it is striking that that has not been achieved. Pioneering work is being done in my local authority to introduce early years centres, very much along the lines of the surestart initiative, and that will be damaged by the review proposals to reduce the number of health visitors.
The national priorities guidance asks local authorities, the Department of Social Security and health authorities to work together for child welfare; the Home Secretary's document on supporting families, to which my hon. Friend the Member for Reading, West (Mr. Salter) has referred, proposed a greatly enhanced role for health visitors; and the conclusions of the Acheson report on health inequalities also have significant implications for Government policy that do not seem to have been seriously considered in Berkshire health authority's proposals.
The proposed cuts included £140,000 off the health visitors service—5.7 per cent. of its budget—which would have meant that it was unable to support the council's early years initiatives; and £40,000 from the speech and language therapy service, which was already under enormous pressure.
A consultant paediatrician told me of a five-year-old child of one of my constituents who had already waited a year and a half for speech and language therapy. The child does not have generalised developmental delay but has a specific speech and language therapy need that was not met in the pre-school years. Those are lost years for the child's education.
The proposals for cuts were called service reviews but, frankly, they were attempts to reach financial targets and did not reflect the serious thinking about service needs and future health provision that a community with as many health problems as Slough requires.
The health authority was surprised by the strength of popular opposition to its proposals. That is partly because the debate about health care has focused on waiting lists and not necessarily on community services. I believe that the reaction showed that local people really care about their community services.
I heard from many people who were concerned about the role of their health visitors. For example, one of my constituents wrote:
Being first-time parents, the health visitor was a source of help and reassurance and we found her invaluable.
That comment sums up the many representations that I received from parents about the support that they had from health visitors.
The proposals caused concern among the people of our community and its Members of Parliament. We had meetings with Ministers—I am grateful to my hon. Friend the Member for Reading, East (Jane Griffiths), who initiated a meeting—at which we had positive responses. It seemed illogical to us that during the process a substantial increase of £29.6 million was allocated to the authority, yet those cuts-led proposals were still being pursued.
Following the meeting with the Minister, the situation began to change almost day by day. I am glad to say that the health authority withdrew the bulk of its proposals last Monday and promised further reviews of health visiting and school nursing—affecting cuts that had been proposed in the west of the county, but not Slough—including consulting the local councils and leaving out the savings targets. I thank my right hon. Friend the Minister for Public Health and her colleagues for that outcome and I hope that the health authority can move on and seek, as the petition that I presented earlier requested, to work instead to improve the health of the people of Slough.
I have to say that it is a crazy way to run a railroad. The health authority, if it is accountable to anyone, is accountable to the body that appoints it—the Government. It has no separate lines of accountability to local communities. Indeed, that is one of the weaknesses of our local health authority, which does not have members with long experience as councillors playing a large role on it. I do not understand how the local health authority can carry on making proposals that run directly counter to the priorities set out by the Government in several different documents and that have to be hauled back from the brink by the intervention of Members of Parliament and the outrage of the people for whose health care the authority is responsible.
A number of questions must be considered. First, I hope that the Minister will assure me that Berkshire health authority will not try to slide some of the cuts in under the wire, because the final version of its decision is not explicitly available to all of us. We do not know exactly what it plans to do. We know that it has withdrawn the present reviews, but it is not clear whether my local community trust will be expected to make the same savings on health visitors and speech and language therapists as were envisaged in the original proposals.
Secondly, when health authorities plan changes to our services, have they been directed to take account of the Government's policies, as outlined in "Our Healthier Nation", "National Priorities Guidance" and "Supporting Families"? Thirdly, if we are going to join up work in health and social services, I urge the Government to consider giving local councils a formal role in the national health service consultative process, perhaps putting them on a par with community health councils, at least in places where such co-operation has not taken place. Finally, in respect of Berkshire health authority, will the Minister outline what steps are being taken—through the Anglia and Oxford NHS region or otherwise—to ensure that the health authority's future actions conform to Government health policy and address the real health care needs of local people?
If we consider the figures, we can see that the town I represent has a health care crisis. The health authority has, so far, demonstrated an absolute inability to tackle it. The Government's published policies create a model through which we could tackle the crisis, but I want to know how we can deliver that model in practice in our community.

The Parliamentary Under-Secretary of State for Health (Mr. John Hutton): First, I congratulate my hon. Friend the Member for Slough (Fiona Mactaggart) on securing time for this important debate, on the way in which she presented her arguments and on the tenacity with which she has represented her constituents' interests in this matter in the House.
My hon. Friend asked four direct questions, and I shall answer each in turn. First, health authorities are given explicit guidance that changes to services must fully reflect Government policy. Regional offices of the national health service will approve an authority's service and financial framework and the health improvement programmes only if those requirements are fully met. That covers my hon. Friend's point about national priorities guidance, which, as she will be aware, applies also to social services departments.
Secondly, health authorities are expected to consult representatives of local councils, together with other groups such as users and carers. That responsibility is set to increase with the introduction of health improvement programmes from next year, when local authorities will play a crucial part in working more closely with the NHS and delivering better services to local people.
Thirdly, the roles of community health councils and local authorities are different, but both exercise considerable influence. CHCs have a unique role in the health service, representing the public interest. Local authorities have a key role in health improvement programmes, as they will be co-signatories, so co-operation will have to take place. As my hon. Friend knows, social services departments will be represented on the new primary care groups. In future, local authority chief executives will also attend health authority meetings.
My hon. Friend asked some questions about Berkshire, which I will explain more fully during my speech. Briefly, it may be worth reminding her that officials from the regional office met the health authority and emphasised the need to ensure that any proposals were fully compliant with Government policy. That involvement will continue into the new year, as the health authority devises its new strategy for families and children.
My hon. Friend mentioned community services, which have a key role to play in the NHS. The Government have made it clear that they expect to see that role develop. Those services are often undervalued, but they cover a vital link between acute services, primary care and patients.
A whole of host of community services are valued by the patients who rely on them. However, as with other health services, it is important continually to review community health care to take account of modern clinical practice. Health authorities must ensure that the services they provide are focused on the patients who most need support, while making sure they make the best use of resources.
The major public health agenda set out by the Government is contained in the Green Paper "Our Healthier Nation", together with the Home Office's "supporting families" initiative. Both have important implications for nurses, midwives, health visitors and other key staff working in the community health sector.
Our White Paper "The new NHS: modern, dependable" established significant changes in the way in which services will be organised. In particular, the development of primary care groups will play a key role in the way community health services are provided in the future. Those groups will also bring a local dimension to how services are best delivered, and will ensure that they reach the people who really need them.
Against that background, Berkshire health authority embarked on a review of community services in both the east and west of the county. Many of those services had not been reviewed for some time, and the health authority was committed to a programme of modernising the services it commissioned for Berkshire patients.
Following the review, but before any changes were made, Berkshire health authority carried out a consultation exercise, which was completed on November 16. Since then, there has been an intensive round of meetings with interested parties, including the two community health councils and the six unitary authorities. Of course, it is to be welcomed when a health authority works closely with its community health councils and listens to the views of local people, to achieve a consensus on how services should be delivered locally.
At the meeting between my hon. Friends and my noble Friend the Parliamentary Under-Secretary of State in another place, it was agreed that the regional nursing director and the director of performance from the Anglia and Oxford regional office of the NHS should advise the health authority on the best way forward.
The role of the regional office was to ensure that the health authority was fully aware of Government policy and its implications for services in Berkshire. As I said in response to my hon. Friend's direct question, that involvement continues today.
At its board meeting last Monday, the health authority announced that it would substantially reconsider the proposals for health visitors, school nursing, and speech and language therapy services. The decision was taken after listening to the views and concerns of the public, local authorities and the two community health councils, and having considered the advice of the regional office. I know that the health authority, in deciding the next stages in its strategy, has also been mindful of the recent letter about community services to regional chairmen from my right hon. Friend the Minister for Public Health.
Although some aspects of the proposals have faced opposition, the proposed changes to community dentistry and podiatry have been broadly supported by the two CHCs. The changes to community dentistry would enable the service to care for the neediest patients. The podiatry service would be focused on patients suffering from diabetes, so that they get the help that they need.
The main question for hon. Members and their constituents is where we go from here. Now that the health authority has decided on this new approach, what will it mean for the people of Berkshire? The aim must be to target resources effectively, while meeting the aspirations of local people and fully reflecting Government policy.
For health visiting, school nursing and speech and language therapy, any proposals will now take in the wider perspective of the health and social needs of children and families, particularly those who are most vulnerable. I am sure that those children are among the main concerns of my hon. Friend. That will mean developing a joint strategy focused on children and families, and then devising a range of health, social and educational services to meet those needs. The health authority will involve staff and local authorities in that process of change. That is in keeping with the national priorities guidance that we announced earlier in the autumn.
Such partnership working had already been identified in the White Paper when it highlighted the need for health improvement programmes, which will have an important role in promoting effective health services for local communities. As I have said, they will not be the responsibility only of health authorities. Social services will have a key role as well in having to ensure that the programmes' objectives are reflected in local plans covering community care and children's services. In reviewing its community services, it is crucial that Berkshire health authority links any review with the health improvement programme, and in particular works together with all six unitary authorities.
The Government's Green Paper "Our Healthier Nation" stressed the need to tackle fundamental inequalities, such as the fact that people on low incomes are ill more often and die sooner. That has been reinforced by the report of the independent inquiry into inequalities in health, which was published last month. The inquiry was commissioned by the Government, led by the former chief medical officer, Sir Donald Acheson, and made a number of recommendations directed specifically at the NHS.
Most notably, it stated that providing equitable access to effective care in relation to need should be a governing principle of all policies in the NHS. Priority should be given to the achievement of equity in the planning, intervention and delivery of services at every level of the NHS.
I know that Berkshire health authority is acutely aware of the problems of deprived areas in a predominantly affluent area. I immediately think of my hon. Friend's constituency of Slough, which has greater needs than much of the rest of Berkshire. I know that parts of it are among the most deprived 10 per cent. in England. I am glad to say that the health authority is now committed to targeting services on the people with the greatest need, and resources will be allocated locally using a formula to be developed with the help of all stakeholder groups and the CHCs.
Those are admirable concepts that the Government will always welcome, but the health authority has still to develop a strategy for children and family services and then put together detailed proposals. Any significant changes would then need to be consulted with and agreed by both CHCs. Should either object, the matter will have to be referred to Ministers for determination. In those circumstances, we will need to be fully satisfied that any changes will improve the delivery of local NHS services in Berkshire.
My hon. Friend raised the issue of funding for the national health service in Berkshire. The Government are well aware of the concerns that the health authority has about funding, but Berkshire has done well under the Labour Government: for the next financial year, it will receive the highest allocation in the Anglia and Oxford region—£.431 million. It will also receive the greatest increase in the region, of nearly £30 million—a real-terms increase of almost 5 per cent.
The health authority has also benefited from the Government's determination to reduce high waiting lists, and it has received further funding to tackle that

inheritance from the previous Administration. The health authority was given £1.8 million to deal with the 1997–98 winter pressures, nearly £4 million of the waiting list additional funding and a further £871,000 to tackle waiting lists this financial year. That all adds up to a great deal of extra money to help to treat more patients in Berkshire. Clearly, some of that money will be spent on providing community services.
The current challenge for Berkshire health authority is to find a way forward in its community services that fully reflects true partnership with other agencies. As I have said, should the matter fail to win the approval of either of the community health councils, it will come before Ministers, who will be mindful of the Government's commitment to supporting the family, and to targeting social exclusion and inequalities in health. I assure my hon. Friend that those are crucial parts of the Government's commitment to improve health. We shall expect them to be properly reflected in any proposals that come from Berkshire health authority.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes past Ten o'clock.